Page 12 - NorthAmOil Week 39

NorthAmOil COMMENTARY NorthAmOil

The first quarter saw a
scramble for available
storage in Europe, and
some LNG cargoes
were also redirected
from China.

fallen compared with a decade ago, they still more competitive than [the] US’, then Europe
remained the single largest source of EU gas will buy more Russian LNG.”
imports, at 40% of the total. Combined Russian This scenario puts LNG producers under
pipeline and LNG volumes accounted for 46% more pressure than ever to lower the capital
of extra-EU gas imports, which the Commis- costs of new projects in order to ensure maxi-
sion said signalled the country’s increasing role mum competitiveness. Indeed, Novatek states
in Europe’s LNG supply. on its website that the design of the Arctic LNG
The Commission’s report also noted an 2 project, which is currently under construction,
“intensive competition” between the US and as well as the use of domestic technology and
Russia for the EU LNG market. However, the materials, “will allow to considerably decrease
first quarter saw a scramble for available stor- the capex per tonne of LNG produced under this
age in Europe, and some LNG cargoes were project”. The company adds that this will “ensure
also redirected from China as the Asian country a low-cost structure of products and maximum
introduced lockdown measures, so there were competitiveness across the LNG markets”.
some out-of-the-ordinary factors in play. Thus, even if Nord Stream 2 is abandoned
– which remains a possibility despite Germa-
What next? ny’s ongoing support for the completion of the
Tkachev pointed out that while the EC sees Rus- project – this does not guarantee that the US The US could also
sia as complementing its pipeline business with will be able to displace Russian gas imports to
LNG exports, this actually points to emerging the EU. find itself losing
competition between state-owned Gazprom and “Whether Nord Stream 2 is commissioned market share to
LNG producer Novatek. Europe receives most or not,” wrote Tkachev, “Germany/Europe’s
of its Russian LNG shipments from Novatek’s LNG purchases will be conditional purely upon Qatar, which is
Yamal LNG terminal in Sabetta, Northern pricing. It may be Russian LNG, not necessarily
Russia. American, even if NS2 fails.” undergoing its
Novatek is adding new liquefaction capacity, The US could also find itself losing market
so its LNG export volumes are anticipated to share to Qatar, which is undergoing its own own expansion
grow further. This week, the company said it was expansion of liquefaction capacity and is pursu- of liquefaction
on track to produce 57-70mn tonnes per year ing a strategy of lowering LNG prices in long-
(tpy) of LNG by 2030, roughly triple what it is term contracts in an effort to capture more of the capacity.
producing currently, despite any setbacks caused market.
by the pandemic this year. Novatek is aiming to Qatar’s tactics threaten new projects globally
raise its share of the global LNG market to 15% that are still trying to get off the ground, but also
by 2025 from less than 10% currently. have the potential to disrupt current LNG trends
This has implications for the balance of Euro- and patterns as the Middle Eastern country
pean LNG imports. brings four new liquefaction trains online.
“I assume Europe is going to buy more LNG For the US, these rising supplies from both
not because of geopolitics, but depending on Qatar and Russia make growing European mar-
pricing,” Tkachev wrote. “If Russian LNG is ket share increasingly challenging.™

P12 www. NEWSBASE .com Week 39 01•October•2020