New natural gas sources to supply Europe

Alexandra Marie Ferraro's picture
Alexandra Marie Ferraro, Energy Analyst, Guest Reporter
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EAGC Chairman Martin Houston, President of Cheniere Energy Jean Abiteboul, and Feedstocks & Energy Director of INEOS Fernando Mota discussed the realities of natural gas supply in Europe today. The panel agreed that there are new sources of natural gas supply, and the United States is front and center in the conversation.

Jean Abiteboul opened by stating “It’s coming. What is coming? The energy from the US.” He said we do not have to wait long to see the impact of US energy on the European market—in fact, the first cargo of US LNG, excluding Alaska, is arriving in January.

Fernando Mota explained INEOS, the world’s biggest consumer of ethane, has shifted its sights to the US for ethane supply. In 2010, his company identified an opportunity to bring ethane from a refinery in Philadelphia to Rafnes in Norway. They have been pursuing US supply ever since. Seaborne ethane, he states, is a promising avenue to diversify one’s resources as concern over natural gas prices rises.

According to Mr. Abiteboul’s calculations, the rate of return on investment for LNG in the US is at 16%. With some of the lowest costs in gas production and liquefaction, he projects that the US is well placed not only to sustain LNG exports, but also to become one of the top three LNG suppliers worldwide along with Australia and Qatar.

Thanks to growth in shale production, Mr. Abiteboul states the US market is now self-sufficient, responds quickly to price signals, and is flexible and market-oriented. Perhaps the best attestation to the US LNG market’s potential is when Mr. Abiteboul shared that Cheniere, whose long-term contracts provide for 5% of the total European gas market, has 15 liquefaction trains currently in development in the US. “The new gas supply is there, so it’s no longer new,” he says.

Other sources of natural gas in Europe

Underpinning this panel’s discussions was a focus on security of supply in Europe. Mr. Mota believes, “Shale gas is an important opportunity to compensate for the increasing dependency of Europe on imports of natural gas from other continents.” INEOS is also focusing on developing UK shale gas production. Chairman Martin Houston’s interest was piqued, “How difficult will shale in the UK be?” INEOS plans a series of innovative measures such as sharing 6% of its revenues with the local communities involved in production, and transferring the knowledge of US geologists working in shale, Mr. Mota explained.

Is Europe ready for new LNG?

Mr. Abiteboul says “Yes”. The load factor of existing regasification facilities in Europe is 30%, so there is plenty of room to receive new LNG.

The panel discussion therefore cast new light on whether or not Europe will be a “market of last resort” for LNG. The developments cited by Mr. Abiteboul indeed indicate the latter.

What is the impact of US energy on European markets? Is Europe ready for new gas? Please leave your comments below.

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