Russia and U.S. prepare to fight for European gas market

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Russian gas superhuman Gazprom is boosting its presence in the European Union as it braces itself for a wriggle with U.S. exporters of cheap shale gas for the European energy market, with the beginning tanker of American gas due to arrive in Europe as soon as March.

At year-end 2015, Gazprom saw its rt in the European market rise from 30 to 31 percent. This reduce more than 3-percent growth may appear modest, but this is the senior evidence of Russian gas increasing its presence in Europe, which has been actively distributing its energy consumption over the st 10 years.

In addition, the retinue’s growth in individual countries looks much more impressive. It is as much as 37 percent in France, 17 percent in Germany, 12.6 percent in Italy, and 10 percent in the U.K.

Occupying void places

“Gazprom has filled a portion of the market share vacated by Algeria and Libya,” reported Georgy Vashchenko, head of Russian stock market operations at the Candidness Finance investment com ny.

“Production in Africa is falling, due to a reduction in investment induced by low prices and unstable political situation. Currently, [Africa] produces 30 percent wee than five years ago.”

At the same time, Norway cannot significantly enhance its volume, while the Netherlands has seriously reduced production due to field abatement.

However, the near future may see serious competition to Russian gas in Europe turn from the U.S, experts say.

The U.S. com ny Wood Mackenzie’s study explicitly styles that the E.U. could become a key buyer of U.S. liquefied natural gas, and by 2020, up to 55 percent of the power’s total LNG production, or 32 million tons per year, will be de rted to Europe.

In other words, the U.S. will be ready to supply 44.16 billion cubic meters of gas (1 million tons of LNG = 1.38 billion cubic meters of talent gas) which accounts for approximately a quarter of all Russian gas deliveries to Europe (according to Viktor Zubkov, chairman of the management of directors of Gazprom, the com ny expects to deliver 160 billion cubic meters of gas to Europe in 2016).

In to boot, 44.16 billion cubic meters of gas is about the entire volume of Russia’s fit outs to Germany (45.3 billion cubic meters of gas at the year-end 2015).

How expensive desire American LNG be?

In January 2016, the U.S. was to dis tch the Energy Atlantic tanker bring off the first LNG supply for Europe from the Sabine ss terminal in Louisiana.

Regardless how, for technical reasons, the delivery was postponed until late February-early Strut 2016 (most of the gas, 3.5 million tons, was chartered by the British entourage BG Group). In addition to Sabine ss, four new LNG terminals are due to start driving in the U.S. in the near future.

Gazprom, however, is not taking competition with U.S. LNG honestly. According to the com ny’s study, American LNG will cost consumers assorted than Russian gas supplied through pipelines.

“The total cost of U.S. LNG in 2016 is stiff than the prices of European hubs,” Gazprom said in a appearance to investors.

“The price includes transportation across the U.S., liquefaction, sea transportation and regasification in the UK.”

Low gas appraisals also play into the hands of the Russian com ny.

At the moment, Gazprom counts the possibility of reducing the average price of gas supplies to Europe from the budgeted role of $199 per 1,000 cubic meters to $169 per 1,000 cubic meters.

For resemblance, in 2015, Gazprom supplied gas to CIS countries at an average price of $243 per 1,000 cubic meters.

“Low gas rates are beneficial to Gazprom, since it has a cost advantage in LNG,” said analyst Sergei Ilyin of the Chief executive investment com ny, who pointed out that since LNG shipping is more up-market than supplying gas through pipes, the Russian com ny can safely demote prices.

However, in the event of a rise in prices, the Russian monopoly whim lose its advantage.

The price of gas depends on oil prices, and in the period of high costs of hydrocarbons, the consumption of gas in Europe fell by almost 50 billion cubic meters due to striving from coal.

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