Natural gas export from the US to Europe
- Written by Dumitru Chisalita, Judicial Technical Expert in Oil & Gas
The US was the first country to understand the importance of preserving its own resources and consume the resources of other countries, this being the policy that gives true power to a state. Since 1920 the American administration promoted the Mineral Leasing Act which banned oil exports. Subsequently the ban was reinforced in 1975 by the Energy Policy and Conservation Act and in 1979 by the Export Administration Act.
The exploitation of unconventional gas in the US has led to the substantial increase of the gas offer on the US market. The offer led to drop in prices down to a level that could endanger investments for exploring and exploitation. This issue has led to the partial lifting of the ban to export gas to Canada and Mexico.
Allowing gas exports to Europe in a crisis situation, we believe it is within the framework of the ‘derogations’ included within the Energy Policy and Conservation Act. This endeavour would balance demand and offer and would determine price increases up to an acceptable level for the American market and to the interest of the oil companies. In fact, most probably the US will allow the export of a certain percentage of the gas output, a percentage that would balance the offer and demand (an attractive price for the producing companies and an acceptable price for the consumers). In this context, several days before the US President’s speech in Brussels, talks had been carried in Washington regarding the granting of permission to export gas through six LNG terminals.
According to a document presented in Venice in 2013, the theoretical maximum liquefied export capacity from the US is of 280 billion cubic metres, almost equal to the quantity imported annually by Europe from Norway and Russia. Of the 16 liquefied natural gas (LNG) terminals in the US, one of them received the export license, while others are applying for the license. Although there is an important capacity to import LNG gas, higher by 20 billion cubic metres than the quantity imported from Russia in 2012, during the same year the imported gas through LNG terminals amounted only to 64 billion cubic metres. One of the main reasons is the LNG price peaking EUR 5/MWh more than the imported gas from the Russian Federation.
The natural gas consumption in 2012 in Europe amounted to 511 billion cubic metres, 161 billion cubic metres coming from the Russia Federation (31.5 percent) and 64 billion cubic metres through LNG terminals (12.5 percent).
Hence, the decision to export gas from the US to Europe could be directly advantageous by providing new sources on the market, while indirectly by a possible price decrease on the LNG market. Also indirectly advantages come, given by the mere presence of this new source on the market, when negotiating with the traditional gas suppliers in Europe. Advantages would be registered by the countries having terminals, such as the UK, France, Spain, Portugal, Italy, Greece, The Netherlands, Belgium and Turkey, but also other countries – the ones supporting LNG capacities in these countries corroborated with the development of the transport infrastructure – that benefit from the access to gas terminals, even though they do not have direct access to the sea.
Romania, out of the equation
Romania does not fit in any of the above mentioned categories and will not benefit from the advantages offered by adopting such a decision. An intention expressed in 2011 to take part to the building of a terminal in another country in order to have access to a LNG terminal was buried, leading to the lack of alternatives today, but mainly in the future.
We underline that the LNG terminal, stipulated in the AGRI project, has no real importance in this equation, as liquefied gas from various parts of the world cannot reach Constanta due to the transit interdiction imposed in the Bosporus strait.