Page 7 - FSUOGM Week 39

FSUOGM COMMENTARY FSUOGM

Qatar with 15%. This marked a contrast to most from less than 10% currently.
of 2019, when imports from Russia exceeded This has implications for the balance of Euro-
those from the US, the European Commission pean LNG imports.
noted. “I assume Europe is going to buy more LNG
Even as LNG imports rose across the bloc not because of geopolitics, but depending on
– led by Spain, France and Belgium – the EU’s pricing,” Tkachev wrote. “If Russian LNG is
import bill fell. In the first quarter it came to more competitive than [the] US’, then Europe
€3.3bn ($3.9bn), compared with €4.8bn ($5.6bn) will buy more Russian LNG.”
in the same quarter of 2019, reflecting the decline This scenario puts LNG producers under
in LNG prices. more pressure than ever to lower the capital
While Russian pipeline gas supplies have costs of new projects in order to ensure maxi-
fallen compared with a decade ago, they still mum competitiveness. Indeed, Novatek states
remained the single largest source of EU gas on its website that the design of the Arctic LNG
imports, at 40% of the total. Combined Russian 2 project, which is currently under construction,
pipeline and LNG volumes accounted for 46% as well as the use of domestic technology and
of extra-EU gas imports, which the commission materials, “will allow to considerably decrease
said signalled the country’s increasing role in the capex per tonne of LNG produced under this
Europe’s LNG supply. project”. The company adds that this will “ensure
The commission’s report also noted an “inten- a low-cost structure of products and maximum
sive competition” between the US and Russia for competitiveness across the LNG markets”.
the EU LNG market. However, the first quarter Thus, even if Nord Stream 2 is abandoned –
saw a scramble for available storage in Europe, which remains a possibility despite Germany’s
and some LNG cargoes were also redirected ongoing support for the completion of the pro-
from China as the Asian country introduced ject – this does not guarantee that the US will be
lockdown measures, so there were some out-of- able to displace Russian gas imports to the EU.
the-ordinary factors in play. “Whether Nord Stream 2 is commissioned
or not,” wrote Tkachev, “Germany/Europe’s
What next? LNG purchases will be conditional purely upon
Tkachev pointed out that while the European pricing. It may be Russian LNG, not necessarily
Commission sees Russia as complementing its American, even if NS2 fails.”
pipeline business with LNG exports, this actually The US could also find itself losing market
points to emerging competition between state- share to Qatar, which is undergoing its own
owned Gazprom and LNG producer Novatek. expansion of liquefaction capacity and is pursu-
Europe receives most of its Russian LNG ship- ing a strategy of lowering LNG prices in long-
ments from Novatek’s Yamal LNG terminal in term contracts in an effort to capture more of the
Sabetta, Northern Russia. market.
Novatek is adding new liquefaction capacity, Qatar’s tactics threaten new projects globally
so its LNG export volumes are expected to grow that are still trying to get off the ground, but also
further. This week, the company said it was on have the potential to disrupt current LNG trends
track to produce 57-70mn tonnes per year (tpy) and patterns as the Middle Eastern country
of LNG by 2030, roughly triple what it is produc- brings four new liquefaction trains online.
ing currently, despite any setbacks caused by the For the US, these rising supplies from both
pandemic this year. Novatek is aiming to raise its Qatar and Russia make growing European mar-
share of the global LNG market to 15% by 2025 ket share increasingly challenging. ™

Week 39 30•September•2020 www. NEWSBASE .com P7