While LNG exports from the U.S. have already strengthened Europe’s bargaining position with Russia, it will not completely free Europe from the dependence on Russian gas – a new study by Columbia University’s Center on Global Energy Policy has found.
The report released on Monday found that while U.S. exports along with other supplies from countries like Australia will over time create a larger, more liquid and more diverse global gas market, to truly capitalise on this opportunity requires changes in European policy and infrastructure that focus on reducing vulnerability to Russian supply disruption, not only dependence on Russian gas overall.
What is more, any substantial change in the European gas market will not be felt for another several years. Those of the American terminals that have already been approved will not be online for several years. Terminals pending approval, if constructed, will not be available until after 2020.
The report also found that Russia is likely to remain Europe’s dominant gas supplier for the foreseeable future, due both to its ability to remain cost-competitive in the region and the fact that U.S. LNG will displace other high-cost sources of natural gas supply. In the report’s modeling the authors have found that 9 billion cubic feet per day (93 billion cubic meters per year) of gross U.S. LNG exports will result in only a 1.5 bcf/d (15 bcm) net addition in global natural gas production.
Having said that, by forcing state-run Gazprom to reduce prices to remain competitive in the European market, U.S. LNG exports could have a meaningful impact on total Russian gas export revenue. However, while painful for Russian gas companies, the total economic impact on state coffers is unlikely to be significant enough to prompt a
change in Moscow’s foreign policy, particularly in the next few years.
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