China starts buying Russian gas

China starts buying Russian gas

The European Union (EU) has agreed to step up LNG imports from the United States, Trump said earlier this week following his talks with European Commission President Jean-Claude Juncker, who confirmed the plans and announced the EU’s intention to build more terminals for this purpose. In 2017, the US supplied 3 bln cubic meters of gas to Europe, which is considered to be a small portion, considering that Europe’s total consumption reached around 500 bln cubic meters last year. The US is going to deliver another 8.4 bln cubic meters by 2020 pursuant to long-term contracts (there are four of them in total).

“For the US, the European market is more attractive than Asia’s since its exporters stand to gain because of lower logistics expenses with minimal price differential with the Asia-Pacific Region,” Vygon Consulting’s Yekaterina Kolbikova explains. According to her calculations, US exports of LNG to Europe can climb to 15 bln cubic meters by 2020 and to 25 bln by 2030 if the share of supplies remains unchanged.

Alexander Sobko, an analyst at the Energy Center of the Skolkovo Business School, holds a similar point of view. “If the sides agree on the price , the European market can get 10-30 bln cubic meters of American LNG in the future, which will be a compromise of sorts. The US keeps out of the construction of Nord Stream 2, while receiving a small extra market for its LNG,” he pointed out.

Amid current high oil prices the American LNG can already compete with its Russian in terms of the price (the gas price is to oil futures – TASS), Sobko said. Meanwhile, if prices backtrack Russian gas will follow dropping in price. In order to compete with Russian gas down the road, the Americans need to cut the price of their projects at the production and liquefaction stages by another 10-15%, he noted.

Expert at the Analytical Credit Rating Agency (ACRA) Vasily Tanurkov agrees that the supplies of American gas to Europe can surge, adding though that the European market is not going to become the core one for the United States. “The point here is not that Russian gas is cheaper, but rather LNG prices in Asia are way higher. That said, the bulk of American LNG will be consumed by China, while the demand for gas there is going to surge by leaps and bounds in coming years,” he said.

CHINA starts buying Russian GAS! Breaking News

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