Trump’s plan for US LNG in Europe to face reality check

The Armada LNG Mediterrana floating storrage tanker enters the Marsaxlokk Harbour, Delimara, Malta, 10 October 2016. The vessel will provide liquefied natural gas to the new power station at Delimara. The Maltese government said that the tanker would be used for a limited time until the gas pipeline with Italy is operative. [Domenic Aquilina/EPA/EFE]

President Donald Trump’s plan for “vast amounts” of US liquefied natural gas (LNG) to be sold to the European Union after trade talks with its top representative faces a reality test.

After a meeting at the White House with European Commission President Jean-Claude Juncker on Wednesday, Trump said the EU would also buy more US soybeans and work with Washington to cut other trade barriers to zero.

Soybeans bring appeasement to EU-US trade war

The EU’s pledge to import more soybeans from US farmers was the ‘dealmaker’ in the agreement between European Commission President Jean-Claude Juncker and US President Donald Trump to stop the dispute and open trade talks, EU sources told EURACTIV.

“European Union representatives told me that they would start buying soybeans from our great farmers immediately. Also, they will be buying vast amounts of LNG!,” Trump wrote in a Tweet.

Juncker said the EU would build more terminals to handle America’s LNG.

It appeared that a major LNG deal between the trading partners had been struck.

In reality, three-quarters of Europe’s existing import facilities lie empty while demand for US LNG on the continent remains limited.

The most lucrative markets for US LNG are in South and Central America, India and the Far East, with Europe near the bottom of the pile given its relatively low prices and ample supplies of gas via pipelines from Russia and Norway.

At the recent NATO summit, Trump blasted Germany for its plan to build the Nord Stream 2 gas pipeline.

Trump begins NATO summit with Nord Stream 2 attack

US President Donald Trump launched a strong verbal attack on Germany on Wednesday (11 July) for its support to the Nord Stream 2 gas pipeline, aimed at bringing more Russian gas to Germany under the Baltic Sea.

Richard Morningstar, a veteran EU diplomat, had warned that Nord Stream 2 would kill the US strtategy to export LNG to Europe.

Nord Stream 2 will kill EU’s LNG strategy, warns US ambassador

The controversial Nord Stream 2 pipeline will wreck the EU’s Energy Union strategy and kill off its plans to boost Liquefied Natural Gas (LNG) in the bloc, a veteran US ambassador has warned.

Global gas price signals determine LNG trade flows, Royal Dutch Shell Chief Executive Ben van Beurden said on Thursday.

“Will US LNG reach Europe? Yes, but only if there is an arbitrage opportunity that makes sense,” he said.

Washington congratulates Lithuania for receiving first LNG shipment from US

The State Department congratulated Lithuania on Wednesday (23 August) for receiving the first shipment of liquified natural gas from the US. The move follows Donald Trump’s visit to Warsaw last month, where he promoted American LNG exports.

Politicians have little sway over this. The EU applies zero tariffs on US LNG imports, so cutting them is not an option to boost trade in any future US-EU talks.

Europe’s declining domestic production of gas from the North Sea, Netherlands, Germany and Norway leaves a growing gap for Russia and potential LNG suppliers in the United States to exploit.

EU gas production will halve by 2040, the International Energy Agency says.

By then, 84% of gas will be imported against 71% in 2016, it says, although it could be less if green energy expands faster and energy efficiency gains reduce the need for gas.

Trump told reporters on Wednesday that Europe would be a massive buyer of LNG to diversify its energy supply – “And we have plenty of it.”

A number of European companies have already announced plans to buy LNG from a new wave of planned US projects.

Portugal’s Galp, Italy’s Edison, Britain’s BP and Royal Dutch Shell are all lining up to lift LNG from Venture Global’s planned Calcasieu Pass project in Louisiana.

But supply from these and other projects will not be ready for years and even then there is no guarantee it will come to Europe in meaningful quantities if more lucrative markets, such as China, emerge.

The benefit of lifting supplies from the US is that a buyer can divert shipments to the highest bidder anywhere in the world without needing the approval of the seller.

Thomas Kusterer, chief financial officer for German utility EnBW, said on Thursday that he would consider purchasing US LNG if it became cheaper than other sources.

Having more LNG options will help Europe avoid being overcharged by Russia, analysts say.

“LNG is a valuable option for Europe, it can create negotiating power,” said Hanns Koenig of Berlin-based Aurora Energy Research.

Kremlin accuses Trump of trying to bully Europe into buying US LNG

The Kremlin yesterday (12 July) rejected US President Donald Trump’s description of Germany as a “captive” of Russia due to its energy reliance, saying his statement was part of a US campaign to bully Europe into buying American energy supplies.

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