US:
Blatant Interference to Deprive Europe of Lucrative Gas Deals
Pyotr Iskenderov
19
May, 2015
The
United States does not shy away from blatant interference into the
EU’s internal affairs, especially energy policy, in an attempt to
deprive Europe of lucrative gas deals.
The
development of the Nord
Stream-2 gas pipeline would
have negative
consequences for
the whole Eastern Europe, including Ukraine and Slovakia. The remarks
were made by the US State Secretary John Kerry before a meeting with
the E.U. High Representative Federica Mogherini in Washington.
He
also emphasized the strength of the US-EU partnership. «We
seem to have a massive amount of our global agenda contained in the
relationships here in this room, which speaks volumes to the strength
of the EU-US partnership in general, and I know people in certain
countries take note of that because I think it’s important», the
Secretary noted.
Creole
Spirit, a tanker from Louisiana transporting US liquefied natural gas
(LNG) arrived to Portugal in late April. It was the first shipment in
a trade relationship intended to shake up the market and make Europe
dependent on the US energy supplies. The hope is pinned on enticing
prices to tip the balance into the US favor.
The
plans fail to meet reality for a number of reasons.
First,
Russia accounts for 30-31% of supplies to Europe. It may be the
leading supplierbut
it’s not the only one. Norway lags slightly behind with 28%.
Staying out of the EU, Oslo closely coordinates with Brussels its
energy policy. The Scandinavian supplier is
followed by Algeria (13%), Qatar (11%) and Libya (2%). For Qatar,
also a LNG supplier,
the US is a competitor. The situation on the European market does not
boil down to Russia-US competition only. It complicates things for
Americans.
Second,
LNG is hardly a challenger to piped gas in Europe. According to the
recent estimates of the Oxford Institute for Energy Studies, the
price for liquefied natural gas in Europe is hovering around
$3.59 per million BTU ($125.7 per thousand cubic meters). The price
of Russian gas this year is $180 per thousand cubic meters. Even if
the estimates are impartial (the British scholars admit the estimates
are rough), one thing is missing here. Unlike American shale gas
producers, Gazprom has signed long-term contracts with European
partners. The price is free to fluctuate. It can be significantly
lowered, if need be. Sea-transported LNG price fully depends on the
current situation on the market. It’s not a competitor to piped
gas.
Third,
the United States has to promote energy projects, which compete with
US-produced LNG. For instance, Trans Adriatic Pipeline (TAP), a
pipeline project to transport natural gas from the Caspian
sea (Azerbaijan),
starting from Greece via Albania and
the Adriatic
Sea to Italy and
further to Western Europe. It is expected to become operational in
2019. The estimated capacity is 10-20 billion cubic meters annually.
It’s a drop in the bucket. Gazprom sells around 160 billion cubic
meters yearly. At the same time, TAP is a serious competitor to
sea-transported supplies.
Fourth,
as a rule the gas price is pegged to the oil price. There is a great
chance that oil prices will go up to negatively affect the US ability
to compete with Russian piped gas supplied under long-terms
contracts. Saudi Arabia, a key player on the world oil market, has
announced its decision to raise the oil price for Asian buyers in
June. This may be a harbinger of upcoming changes.
Asia accounts for more than half of Saudi exports.
According to KBC Energy Economics, a leading consulting company,
consumer demand makes oil prices grow.
The
competition between sea-transported US LNG and Russian piped gas
continues. Washington is far from being a clear winner. That’s why
US officials meddle in to promote American energy producers’
interests in Europe. John Kerry has gone as far as to openly
interfere into EU internal affairs. But the pressure from the US will
not make life better for the Europeans.
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