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The new European energy interconnections could benefit the American oil and gas industry, as the infrastructures would create apt conditions for LNG exporters, ExxonMobil’s Richard Scrase toldNatural Gas Europe.
“Given the existing LNG import and pipeline infrastructure available in Europe, there exists a ready market to receive shipments from the US and further diversify European energy supply sources” Scrase, Media Adviser, said in an interview.
The company, already operator of the Papua New Guinea (PNG) liquefied natural gas (LNG) joint venture, refrained from comments on geopolitical questions, but explained that the potential role of the United States as a LNG global leader has to do with its capacity to accelerate projects to export gas to Europe and elsewhere. Implicitly referring to the first-mover advantage, Scrase put additional pressure on the U.S. Department of Energy (DOE).
“Of course, because of competition from around the world, how much LNG ultimately gets exported from the United States depends on how quickly the country can build the facilities to liquefy and export the gas. The U.S. LNG industry needs to capture its space in the global market by signing up customers now, before rival projects do” he commented.
According to a recent report, the export of US gas to Europe could be accepted by European authorities in light of increased energy security.
The first-mover advantage remains significant also in the current context, in which price volatility and climate framework uncertainties raise eyebrows among the industry.
This viewpoint is reflected in recent events, signalling that the LNG market could be the next big thing. Several countries did indeed show interest for the LNG option.
For instance, despite its economic problems and the serious test for the entire industry represented by the next 18 months, Russia’s National Wealth Fund granted $2.462 billion to Novatek’s Yamal LNG project in December 2014. In this sense, the slim margins are endangering new projects, but several countries don’t want to miss out on the long term opportunities.
Moscow is also looking at developments in the Leningrad Region. On Thursday, Gazprom confirmed its intention to build an LNG facility near the seaport of Ust-Luga, about 110 kilometres west of St. Petersburg. A few hours later, Gazprom Marketing & Trading Singapore signed a long-term sales and purchase contract for 2.9 million tons of LNG a year from the Yamal LNG project. The gas will be delivered for 20 years to the Asia-Pacific markets, mostly to India.
Apart from Russia, also Australia, Canada and Mozambique potentially are strong competitors on a global scale. Nonetheless, as pointed out by Leonardo Maugeri in a recent report, all those countries are stumbling upon growing difficulties: cost overruns in Australia, lack of final investment decision in Canada and some poor planning in Mozambique are increasing the odds of an American leadership.
So what's missing? What's next?
ROLE OF REGULATION - EXXONMOBIL LOOKS AT THE DOE
“If U.S. LNG is held back by regulatory inaction, the opportunity for enhanced economic growth and environmental benefits both in the U.S. and abroad could be much diminished. In this regard the DOE should expeditiously evaluate and act upon LNG export applications, and allow the competitive market to direct investment and capital expenditures. At present, the agency/regulator has over 25 projects waiting for approval with only a handful approved to date” said Scrase.
Regulation remains the key point for future developments in the US. In case of a green light from the national authorities, ExxonMobil could export "American" LNG in 5 years.
“Through our partnership with Qatar Petroleum, we are seeking regulatory approval from the DOE to be able to export LNG from the Golden Pass LNG terminal in Louisiana. If developed, construction is projected to take approximately five years to complete. A final decision on the proposed $10 billion investment will be made following government and regulatory approvals” ExxonMobil’s Media Adviser told Natural Gas Europe.
HOW DOES THE AMERICAN CONTEXT LOOK LIKE?
Golden Pass Products, which is a partnership of ExxonMobil and Qatar Petroleum Internationalaffiliates, is proposing to add export capabilities to its LNG import terminal in Sabine Pass, Texas. It is waiting for regulatory approval, which many commentators expect very soon.
At the moment, the best positioned company remains Cheniere, which is already working on its second project to export LNG.
The American debate had been mainly focused on the impact of LNG exports on domestic prices and on net economic benefits for the country. The sentiment is more favourable than some months ago.
As said by Scrase, the agency/regulator has over 25 projects waiting for approval. Here the list.
In this sense, in the next weeks, US decisions will unravel, with possible consequences on the global market, the European market and some geopolitical equilibria, too.
Scrase also repeated ExxonMobil’s forecast for natural gas, saying that natural gas will become the world’s fastest growing major energy source by 2040. Now much will depend on government and regulatory approvals. Some might say that the first-mover advantage is at stake. Some might even add that the next months will also sketch the future of gas in Europe and worldwide.
