Low-priced US natural gas still not reaching Europe

Natural gas price levels have continued to remain at low price levels in the US market, subduing the export prospects of large LNG amounts via new terminals being developed on the country’s east coast.

American LNG output, based on shale reserves, is regarded as a significant alternative energy source in Europe, especially the EU’s member states in the east, seeking to end their dependence on Russian natural gas.

As previously reported by energypress, leading US exporter Cheniere, primarily active in LNG-related businesses, has expressed interest in the development of a floating LNG station in Alexandroupoli, northeast Greece, either as a supplier or project partner.

Forbes magazine has forecast US natural gas prices will range between 3-3.50 dollars per MMBtu in 2017, up compared to the level of 2.60 dollars in 2016.

In more recent times, international prices have risen as a result of freezing temperatures that have affected many regions in the Northern Hemisphere, increasing heating fuel demands.

Analysts believe American LNG exports could increase from the current level of 42 million cubic meters per day to levels of between 283-339 million cubic meters per day between 2016 and 2020 through increased shale gas development and flexible contracts.

Until now, the greatest proportion of LNG exports has headed to Latin America as energy shortages experienced by many countries in the region have forced them to import. A turn towards Asia is considered highly likely. Natural gas demand in this region is expected to grow. Price levels recently reached a two-year high. Most recently, they fell slightly to 9.50 dollars per MMBtu.

By comparison, European price levels remained subdued in 2016, registering 5.50 dollars per MMBtu in December. The colder weather experienced over the past month or so has temporarily increased demand and prompted extraordinary LNG imports from specific markets. Price levels for February deliveries reached 10.39 dollars per MMBtu in France and 10.31 dollars per MMBtu in Spain. Similar prices have been shaped in Italy, where increased gas imports are needed for the country to make it through the winter.

It was initially believed that Europe would serve as the main market for American gas exports as a result of the continent’s need to break its dependence on Russian supply and the energy security policy pursued by Brussels. However, market forces have had the upper hand.

Even so, latest data showed that two very recent LNG load dispatches from the US are headed for European shores. American LNG is being traded in a liberal fashion without long-term contract commitments between suppliers and clients, as is preferred by other gas producers.

Forecasts envisioning an increase in American LNG exports as a result of the country’s ongoing shale reserve development should make available considerable amounts towards the end of the decade, permitting European firms to order greater amounts.