Yesterday Reuters reported that an emergency energy plan was being constructed for Europe, should gas stop flowing through the pipelines that connect European homes with Russia’s natural gas.
“Kiev is warning that Russia plans to halt gas supplies while Moscow says Ukraine could siphon off energy destined for the European Union – which has just threatened new sanctions if Moscow fails to pull its forces out of Ukraine,” Reuters reported.
Qatar and Algeria ship liquefied natural gas (LNG) to Europe, but “European buyers often re-sell those cargoes abroad for higher prices rather than supplying their domestic market,” the news agency reported. Reuters’ source at the EU Commission said it was considering a ban on the practice of re-selling to grow reserves. “Our best hope in case of a cut is emergency measure 994/2010 which could prevent LNG from leaving Europe as well as limit industrial gas use in order to protect households,” a source told Reuters.
“European Union Regulation number 994/2010, passed in 2010 to safeguard gas supplies, could include banning gas companies from selling LNG tankers outside of Europe, keeping more gas in reserve, and ordering industry to stop using gas,” Reuters reported.
“European utilities have been preparing for a supply cut by injecting as much gas as possible into storage and as a result, the region’s storage facilities are filled to 90 percent, or 70 billion cubic metres (bcm), equivalent to 15 percent of Europe’s annual demand,” Reuters said.
Rapidly growing production coming from the U.S. shale basins has resulted in making the U.S. the world’s largest gas producer. But last week, International Energy Agency Director Maria van der Hoeven told delegates in an international energy conference in Norway that U.S. shale gas won’t make a difference in Europe.
Supporters of exporting liquefied natural gas (LNG) from the U.S., including the U.S. House of Representatives, have touted U.S. natural gas as a way to boost Europe’s energy security, but “continued strong gas demand in Asia and competition for LNG mean that new volumes will be hard to come by in the case of supply disruption,” van der Hoeven told the European conference attendees, according to a report by UPI.
Even though large scale shipments of U.S. LNG have to await new LNG export plant capacity, U.S. gas producers are already making plans to market the domestic oversupply via LNG export to both Europe and Asia. Cheniere Energy (ticker: LNG) has already locked up 20 year agreements for its liquefaction plant capacity along the U.S. Gulf Coast while its plants in Louisiana and Texas are still under construction. About a dozen U.S. LNG projects are in various stages of permitting and design. Cheniere’s Sabine Pass plant will likely be the first U.S. LNG export plant to ship U.S. shale gas, with first shipments expected in 2015. Together Cheneire’s two Gulf Coast plants will represent approximately 40.5 million tons per annum (mtpa) of LNG destined for global markets, or approximately 5.5 Bcf/d of natural gas.
Natural gas producers working in the largest U.S. shale basin, the Marcellus shale, are predicting significant increases in production in the next few years. Range Resources (ticker: RRC) believes it can increase its production to 3 Bcfe/day, given its acreage, drilling inventory and infrastructure the company has put together during the past decade. Magnum Hunter Resources (ticker: MHR), another Marcellus-focused producer, has also constructed its own midstream takeaway capacity. Gary Evans, Chief Executive Officer of Magnum Hunter, discussed his company’s Marcellus and Utica strategy in an exclusive video interview at EnerCom’s The Oil & Gas Conference® 19.
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