The United States’ first shipment of liquefied natural gas (LNG) has made its way to Europe this week. The U.S. has always been a big LNG producer but not big on export. Now that the country is becoming an exporter, analysts are saying it will be causing competition in the LNG market.
Credit: Bloomberg News
The market has been dominated by Russians companies. However, Thierry Bros, an analyst at Societe Generale told Wall Street Journal: “It’s the start of the price war between U.S. LNG and pipeline gas.”
The U.S. delivered the LNG to Portuguese company Galp Energia. Analysts say that the U.S. will become a key player in LNG exporting by 2017.
Russia is currently shipping LNG that is 35% more expensive than the U.S, but according to WSJ, the suppliers were prepared for a price war and would be able to cut rates in half. Russia cannot afford to lose business in the LNG sector due to the export being one of the most profitable exports the country has.
An energy analyst from Strategy&, Rui Almeida, spoke to SputnikNews about the Russians’ situation:
Gazprom [the Russian energy company] will be faced between losing market share or lowering prices. And Gazprom has publicly said they will defend market share so the best is on lowering prices. What we may see play out in gas is not dissimilar to Saudi Arabia’s strategy in crude market – going for market share, maintaining production to price out higher marginal cost producers namely US oil. We may witness a similar strategy by Gazprom as it protects market share in Europe.