U.S. Gas Exports Unlikely to Ease Tensions Over Ukraine

U.S. Gas Exports Unlikely to Ease Tensions Over Ukraine

Europe Will Still Rely on Russian Gas as First U.S. Shipments Are Two Years Away

By

SELINA WILLIAMS
March 18, 2014 12:50 p.m. ET
LONDON—Natural gas exports from the U.S. are unlikely to help ease the tensions between Europe and Russia over Ukraine as the first such shipments are about two years away, a senior executive from oil and gas company BG Group PLC said Tuesday.

The U.S. has vast supplies of cheap natural gas thanks to the fracking boom and could become one of the world’s top three exporters of liquefied natural gas by 2025, BG said. Over the past week, some U.S. politicians have urged the Obama administration to speed up oil and natural gas exports to weaken Russia’s hand over Ukraine.

Russia supplies about 30% of Europe’s gas requirements, half of which transit via Ukraine, a factor some believe has stifled European opposition to Russia’s annexation of Crimea.

Federal law places heavy restrictions on U.S. companies from exporting natural gas to countries, like those in Europe, that aren’t among its free-trade partners.

Applications have already been made to export a total of over 260 million metric tons a year of LNG from the U.S. Even so BG, one of the biggest participants in the global LNG market, said it expects only about 60 million tons to 70 million tons of annual export capacity to be developed by 2025.

Andrew Walker, BG’s vice president of global LNG, said the company didn’t expect much fast-tracking of export applications unless there was a significant change in external circumstances.

BG clinched the first contract to export U.S. natural gas from the Sabine Pass, La., terminal in 2011. It expects those exports to commence in late 2015 or early 2016.

Mr. Walker said that the situation for gas prices and supplies in Europe was “fairly relaxed,” despite political tensions. The region only imported a net 35 million tons of LNG last year, the lowest level in nine years, with demand subdued due to weak economic growth, he said.

Meanwhile, global LNG supplies leveled off for a second consecutive year as new production was offset by unplanned outages, declines in output from existing plants and new projects ramping up more slowly than anticipated. This trend will keep LNG markets tight until at least the end of the decade, BG said in its annual global LNG outlook.

“We’re an industry in hiatus. Developing new supply, rather than demand is the principal challenge the industry faces,” Mr Walker said. Last year, only one in 10 new LNG projects awaiting final investment decisions was sanctioned.

Write to Selina Williams at selina.williams@wsj.com

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