From Power Magazine

Hopes that the beleaguered U.S. shale gas industry can find new markets have come to fruition as the second shipment of liquefied natural gas (LNG) was unloaded at a European port on July 22, with the promise of more to come.

After being loaded at the Cheniere-owned Sabine Pass Terminal in Louisiana (Figure) on July 4, the tanker Sestao Knutsen, carrying 138,000 cubic meters (m3) of LNG, docked at the Reganosa terminal at Ferrol in northwest Spain after waiting several days off the coast. The tanker is the second to land in Europe after the Creole Spirit docked at Portugese port of Sines on April 26.

These first European shipments come after a February federal ruling allowing export sales. According to Platts, 15 LNG vessels have now left Port Sabine for various other worldwide LNG terminals, mostly in South America and Asia. However, the two landings in Europe may signal a major shift on the continent.

LNG Exports Growing but Markets Uncertain

Cheniere bullishly estimates that the U.S. will become the third-largest LNG exporter by 2020, with a production capacity of 60 million metric tons/yr. A supporting statement from Reganosa predicts that Spain will become a leading U.S. LNG importer because it has more regasification terminals than any other European country and because its own terminal is the ideal place to receive such flows. That Spain and Portugal are the first landing spots makes additional sense not only because of their closer proximity to North America but also because, as Platts suggests, the region is “an island market with poor interconnection to the rest of Europe.”

However, Platts also warns that these two shipments should not be taken “as a sign that U.S. LNG will take hold in the wider European market,” since neither Russia nor Norway directly supply the Iberian market with gas. “So they are unlikely to be concerned about U.S. LNG headed to southwestern Europe.” Algeria is currently the major supplier to the region—more than half of that nation’s 27 Bcm of exported gas ended up in Spain and Portugal, according to Platt’s research. Algeria’s response to the threat of U.S. imports has been to flood the market further, doubling gas flows there.

U.S. producers are very much hoping to break into the relatively over-supplied European gas markets and find their own pricing niche. Many European buyers also want to increase their supply options away from Russia and pipelines that transit through areas of rising instability, such as Ukraine and now Turkey. With relatively fixed costs, U.S. suppliers hope to land an increasing amount of LNG cargos on the spot market and take advantage of pricing fluctuations.


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