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Research Report

Surging Liquefied Natural Gas Trade: How US Exports Will Benefit European and Global Gas Supply Diversity, Competition, and Security

Bud Coote
Copyright Date: Jan. 1, 2016
Published by: Atlantic Council
Pages: 28
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Table of Contents

  1. (pp. 3-4)

    The last decade was an eventful one for natural gas, highlighted by a dramatic revolution in US shale gas production. This revolution reversed the trend of rising US gas imports, forcing many LNG import terminals to close and prompting a rush to convert them into LNG export terminals. Globally, LNG trade continued to grow, including LNG redirected from the United States to other destinations, making the impact of the US shale gas revolution felt in foreign markets before even a drop of new LNG from the United States was exported.

    Outside the United States, the decade was marked by record-high...

  2. (pp. 5-6)

    The fall in global natural gas demand and prices since early 2014 is likely to slow gas production for at least the next five years. The IEA recently forecast that gas production growth will increase at an average annual rate of 1.9 percent during 2014-20, down from an average rate of 2.4 percent during the previous ten years. However, the IEA anticipates that gas production growth is likely to grow at a higher rate beyond 2020 as demand picks up and gas prices strengthen.10

    While global production may slow, US gas production, including shale gas production, will continue to grow,...

  3. (pp. 7-8)

    Despite the consensus view that the gas market is likely to remain slack over the next five to ten years, demand should grow in the major markets of Asia, Europe, and North America, and stronger markets for gas are likely to emerge in Africa, Latin America, and the Middle East. The IEA predicts gas demand will increase at an average annual rate of 2 percent during 2014-20, slightly faster than production growth but a slowdown from average growth of 2.3 percent over the past ten years. The IEA also sees a slack market for LNG through 2020 because of competition...

  4. (pp. 9-10)

    US exports are poised to surge over the next several years, driven by the US boom in shale gas production and a large differential between gas prices in the United States and those in Asia and Europe, the other major markets, especially during 2011-14. A dramatic decline in oil and gas prices in Asia and Europe since late 2014 and slower growth in global gas demand could undermine the profitability of US LNG exports. However, interest among major consumers in US LNG remains strong as a means to improve competition and diversification in markets abroad and to provide additional protection...

  5. (pp. 11-12)

    The US gas industry delivers gas dependably and at a competitive price. In the domestic market, the gas industry has paralleled the oil sector in reducing costs to support production volumes, especially by cutting costs for services and equipment. US exporters of LNG face additional challenges, including added liquefaction and LNG shipping expenses, competition from foreign LNG exporters, and competition from pipeline exports. As in the US market, LNG exporters also have competition from other fuels, especially coal and renewable resources. In the Asian market, US LNG exporters must deal with a large decline in LNG demand from Japan as...

  6. (pp. 13-16)

    Europe’s future natural gas strategy and goals complement plans in the United States to export LNG. Two main pillars of Europe’s gas strategy are diversified supplies and stronger integration of European markets and infrastructure. Connecting national pipeline networks in the Baltics and Central and Eastern Europe with Western Europe is especially important because countries in these regions depend on Russian gas and lack adequate links to import gas from other sources in the event of a cutoff.31 Moreover, Russia proved itself unreliable as a supplier by cutting off gas supplied through Ukraine in January 2006 and again in January 2009....

  7. (pp. 17-18)

    Compared with other fuels such as gasoline, diesel, liquefied petroleum gas, and natural gas in its gaseous phase, LNG is relatively safe and has a generally good record of safety and security.46 LNG is a clear, colorless, and nontoxic liquid formed when natural gas, primarily methane, is cryogenically cooled to about -260°F. This shrinks the volume of gas by a factor of about 600, making it easier to transport and store.47 LNG is stored and transported in liquid form and not under pressure, which also enhances its safety by making it more difficult to ignite, and its nontoxic character and...

  8. (pp. 19-20)

    Global demand for natural gas continues to grow and markets for LNG are still expanding. LNG supplies are likely to continue to increase and link the major regional markets of North America, Europe, and Asia. More connectivity between the major gas markets means more diversity of gas sources and routes; more price competition; less monopoly pricing; more pressure on oil-indexed prices; and more demand for gas as a low-risk, competitive fuel.

    For the United States, LNG exports offer an opportunity to produce and sell more gas without paying more at home. Growth of US LNG exports will benefit the US...