In conversation with Cheniere's Jean Abiteboul: The role of US LNG & Europe's gas market

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Jean Abiteboul, ‎Former Senior Vice President Supply&Marketing, Cheniere Energy
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In this interview, we had the pleasure of discussing US LNG into Europe as well as Cheniere's plans to strengthen its position in Europe's gas market with Jean Abiteboul, President at Cheniere Energy.

Gastech News: As the global dynamics of gas are undergoing fundamental changes, what do you think Europe needs to do to invest more in energy infrastructure, and what key progress can be done in this direction?

Jean Abiteboul: I believe as far as Western Europe is concerned, there is enough re-gas capacity to cope with new LNG coming in from the U.S. The load factor in Western Europe is about 30%, so there is plenty of room for new LNG. I would not say the same thing for South Eastern Europe where I believe additional re-gas facilities and some interconnection infrastructure still have to be built in order to facilitate new room for U.S. LNG investment to participate in the diversification of supply.

Gastech News: In a historic move, that would not have been predicted five years ago, the US has become an exporter of LNG...

Jean Abiteboul: The first Cheniere LNG export, which was also the first US lower 48 LNG export, was loaded in Sabine Pass on February 24 and sent to Brazil, opening a new page of the LNG industry history and starting the interconnection between the largest natural gas market with the rest of the world.

Gastech News: Talking about new gas imports into Europe, what’s the U.S.’s role moving forward?

Jean Abiteboul: I think the first impact we will see concretely on the market will be the diversification of supply geographically speaking. Also diversification in price mechanisms and more flexibility, more response to the price signal of the market and more room for optimization and arbitrage between the different regions. So, to summarize the impacts in a few words: more flexibility, different price mechanisms, and more market oriented.

Gastech News: You talked about flexible pricing, but what about contracts?

Jean Abiteboul: The long-term contracts that have been signed between Cheniere and their customers, have no take-or-pay nor destination clauses; the only long-term commitment that has been made by our customers is to pay the liquefaction fee. So they will have the choice: either to offtake LNG or not and if they do, to redirect this LNG to wherever in the world they think it’s the most appropriate. So, it will be a fully flexible market.

Gastech News: What are Cheniere’s plans to strengthen its position in Europe’s gas market?

Jean Abiteboul: We have already started to strengthen our positon by signing long-term contracts with a lot of European customers. To give you an order of magnitude, the long-term contracts we have already signed with European consumers account for approximately 5% of the whole gas market in Europe - not LNG only, the gas market. As another example, we will supply 30% of the Spanish gas market under long-term contracts. So that’s for our long-term commitment. For our short-term activity, we will develop a trading platform in order to supply additional short-term or mid-term quantities based on every kind of price mechanism that takes place in Europe. It can be Henry Hub but it can also be spot related prices in Europe, such as NBP or TTF - all kinds of price mechanisms. Finally, I would say that we are considering a new project in South Eastern Europe to supply LNG to this region, which today is almost 100% dependent on Russian gas.

As I said earlier, Western Europe has already in place a gas infrastructure and interconnections. In South Eastern Europe you still need additional re-gas capacity. For instance, there is one project in Croatia and one in Greece. In order to supply this region with additional LNG, you would also need additional pipeline capacity between those projects and their neighboring countries. So we are presently having discussions with all the stakeholders in this project in order to be able to supply LNG there.

Gastech News: What are your predictions for the European gas industry in the next two or three years?

Jean Abiteboul: It’s a very difficult question, it depends on so many things happening in Europe but also outside Europe since the LNG market is now fully interconnected: what happens in Asia can have an impact on what happens in Europe. You also have the impact of the other energy industries, for example the nuclear industry and the coal industry. The carbon tax and the carbon dioxide pricing mechanism will also obviously have an influence. There are so many moving parts and aspects to this that it’s difficult to make a prediction. But whatever these parameters are, I believe that there is a real future for natural gas in Europe and that there is a real future for U.S. LNG deliveries to Europe. At the end of the day, we need to organize a liquid market that will be able to respond to price signals, and we must allocate the best energy for any kind of customer at the best price. If this market behaves correctly, the European gas market will work adequately.

Gastech News: You attended the European Autumn Gas Conference last year in Geneva. What does the EAGC mean for you?

Jean Abiteboul: Meeting friends and having discussions, of course networking and being able to challenge your own opinions and point of views with others. Gas is changing so dramatically that it’s always a danger to stay with your own old reflexes and it’s always good to discuss and have some contradictions from any kind of participant.

Jean Abiteboul, President at Cheniere Energy is a member of the European Autumn Gas Conference Executive Advisory Board. The 2016 EAGC Executive Advisory Board comprises many of Europe’s most influential gas executives, tasked with ensuring the European Autumn Gas Conference will thoroughly explore the most relevant and topical issues driving the European gas industry today. For further event information on the European Autumn Gas Conference, please visit www.theeagc.com.

Join the Conversation: How important a role LNG will play in Europe’s energy mix? Leave your comment below.

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