U.S. LNG expansion halted

The coronavirus pandemic questioned Washington’s plans to become a leader in the European liquefied natural gas market. The whole of last year was marked by American LNG, in order to strengthen its position in the EU, the United States declared war on the destruction of Gazprom’s pipelines.

COVID-19 did what the top managers of the corporation could not afford: overseas LNG turned out to be so uncompetitive at the moment that European buyers themselves refuse it, despite penalties.

Throughout the past year, the US has been actively increasing its market share in the EU. If initially Qatar was in the first place, and Russia in the second, then by the end of 2019, the Americans were able to break out from third place in the lead. The plans of the shale workers were ambitious: in 2020, to increase exports by 21% and still the same in 2021. Only the coronavirus and the “echo of the oil war” could stop this triumphal procession.

At first, due to general quarantine, the volume of demand and production has sharply decreased. Oil and gas today are not needed in the previous volumes, and it is completely unclear when everything will return to normal, and whether it will return at all. The size of the "hydrocarbon pie" has dramatically decreased, but the "eaters" have not diminished.

Secondly, due to an oversupply of the market and an abnormally warm winter, gas storages in most European countries are full. As in the case of oil in the United States, in the EU there is simply nowhere to pour LNG.

As a result, American LNG in the market was not just expensive, but fabulously expensive. Because of this, buyers began to massively refuse to accept the already contracted American LNG. Bloomberg analysts believe that up to 60% of the ordered volumes will be returned in July. Suppliers from the United States rely on the penalties provided for in the contracts, but consumers hope in court to prove the fact of force majeure. For shale workers from the USA, this is a serious blow.

A logical question arises, what's next. Unlike oil, where the OPEC + cartel deal operates, the gas market has nothing of the kind, so the competition is even more fierce. Some experts are in a hurry to bury the American LNG industry. New LNG projects in doubt, US Department of Energy published a forecast for a decrease in gas production in the country. Qatar is trying to maintain its stake through dumping. The Russian Novatek, with its LNG, exempted from paying export duties, feels rather well with state support.

Gazprom stands out with its pipelines. On the one hand, supplies to Europe this year will be reduced from 200 billion cubic meters to 165 billion, that is, there is a physical collapse. On the other hand, the corporation has a serious competitive advantage in the form of cheap gas transportation through pipes. Having lost in total volumes, the monopolist has the chance to eventually even win as a percentage if US LNG continues to lose ground.

Therefore, we must clearly understand that the confrontation in the gas market will inevitably take place, and all-round pressure on Gazprom projects in Europe from Washington and its allies will only intensify.
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  1. Sergey Latyshev Offline Sergey Latyshev
    Sergey Latyshev (Serge) 23 May 2020 12: 53
    E .. And just yesterday, the day before yesterday they wrote that Belarus, Poland and all sorts of people continue to buy not our gas ...
    1. Observer2014 Offline Observer2014
      Observer2014 23 May 2020 17: 31
      Quote: Sergey Latyshev
      E .. And just yesterday, the day before yesterday they wrote that Belarus, Poland and all sorts of people continue to buy not our gas ...

      yes laughing Yes it is. Never mind. lol Trump is our man ?! winked
      1. Oyo Sarkazmi Offline Oyo Sarkazmi
        Oyo Sarkazmi (Oyo Sarkazmi) 24 May 2020 22: 22
        Quote: Observer2014
        Trump is our man ?!

        Even my own. Gorbachev's younger brother. And he does the same thing as Gorbachev for the USSR. Under the big words about greatness - ruins the real economy.
    2. Oyo Sarkazmi Offline Oyo Sarkazmi
      Oyo Sarkazmi (Oyo Sarkazmi) 23 May 2020 21: 06
      Quote: Sergey Latyshev
      that Belarus, Poland, and all sorts continue to buy not our gas ...

      Yeah. Lithuanian and Finnish.
      1. boriz Offline boriz
        boriz (boriz) 24 May 2020 11: 17
        And also Estonian and German.
  2. boriz Offline boriz
    boriz (boriz) 24 May 2020 11: 17
    In general, the forecasts did not come true. US will not drive Gazprom out of Europe.
    But US affairs are even worse. The fact is that a significant part of the LNG produced in the USA was associated gas, which had long been learned not to burn, but to collect (by the way, with us too).
    And since US oil production is seriously declining, the volume of associated gas produced is also declining.
    And this opens up new, sad prospects for the United States. The United States is not facing a struggle for supremacy in gas supplies to Europe. Since oil prices have fallen, gas prices will also fall with a six-month lag. And if before the cost of US LNG was uncompetitive (more or less sold only under political pressure and on the spot markets), now their LNG will not be sold from the word "at all". And the reduction in the volume of associated gas will put the United States in front of the problem simply to ensure domestic consumption. They will lose all their markets. The USA will cease to be a gas exporter.
    And this is sad for the US economy. Trump can arbitrarily say that gas in the US GDP is only 1%. But, in the near future, it will clearly show that the US GDP is a huge amount. It can be safely divided in half, if not more, this is a separate issue. But in the structure of LNG export, it occupied 12%, which is already serious.
    Trump is going to make America great, forcing Europe and China to buy as much as possible from the US, including hydrocarbons, and there will be no gas for export. How to ensure trade balance with Europe and China?