Gas Wars: Will US Export LNG to Europe?

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By James Stafford for OilPrice.com

Russia’s move on Ukraine’s Crimea region has sparked Central European countries to increase calls for the United States to export its natural gas to Europe and help the region reduce its energy reliance on Moscow.

Former Soviet satellites Poland, the Czech Republic, Hungary and Slovakia—otherwise known as the “Visegrad 4”—are hoping to lobby Washington to remove bureaucratic hurdles for exporting US natural gas to Europe to minimize the effects of gas a key weapon in Russia’s political arsenal.

“With the current shale gas revolution in the United States, American companies are seeking to export gas, including to Europe. But the existing bureaucratic hurdles for the approval of the export licenses to non-FTA (free-trade agreement) countries like the Visegrad countries are a major hurdle,” the four countries’ ambassadors to the US wrote in a letter to House Speaker John Boehner.

Last year, Russia's Gazprom supplied the European Union and Turkey with a record 162 billion cubic meters of gas. Of that gas, 86 billion cubic meters transited Ukraine, and the current showdown between Russia and Ukraine over the latter’s majority ethnic-Russian Crimea region, has the rest of Europe fearful of another supply cut-off.

Previous disputes over gas payments between Russia and Ukraine have caused Russia to cut off supplies that feed Eastern and Central Europe.

Last week, Russia threatened the new interim Ukrainian government that it might shut off the taps over unpaid bills, and particularly over $440 million that was due in February.

For Ukraine, getting the US to export liquefied natural gas (LNG) to Ukraine and to the wider Central European region, is now more vital than ever. And if this conflict escalates, it could derail gas deliveries bound for Europe, because much of Europe’s gas goes through pipelines that pass through Ukraine.

Before the mass protests that led to ouster of President Viktor Yanukovych in February, there were already efforts underway to build a floating offshore terminal to receive LNG shipments. It would be a powerful message to Russia if American-flagged vessels were bringing LNG here.

However, even if the US moves to heed Central Europe’s pleas, natural gas in the form of LNG would not reach European shores before 2016, but the message to Russia would nonetheless be a strong one.

The idea is gaining momentum in Washington, though. On 10 March, Senator John Barrosso (R-Wyo.) announced plans to introduce amendments to the economic assistance package to Ukraine that will be considered by the Senate Foreign Relations Committee. The amendments will focus on allowing the US to export LNG to Ukraine and members of NATO.

This article was originally published on OilPrice.com.



The views and opinions expressed herein are the views and opinions of the author and do not necessarily reflect those of The NASDAQ OMX Group, Inc.



This article appears in: Investing , Commodities , International , US Markets

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