Gazprom expects an average export price for gas in 2018 of about 230-240 dollars per thousand cubic meters, said the head of the analysis department of Gazprom export Andrei Zotov.
In June, Deputy Chairman of the Board of Directors Alexander Medvedev said that Gazprom expects an average export price of gas in 2018 at $ 220 per thousand cubic meters and above. He recalled that last year this figure was 197 dollars per thousand cubic meters.
Gas war is canceled
The last few weeks have passed under the sign of large-scale statements made by US President Donald Trump at a meeting with European Commission President Jean-Claude Juncker. The essence of the joint statement of the two politicians was that the US is very anxious to supply as much LNG as possible to Europe, and the European Commission seems to be very eager to buy it. The leitmotif of the joint communiqué was a statement about the desire of European countries to “diversify energy supplies.” Network sentry patriots and experts of various calibres with enthusiasm rushed to repeat in every way the rash maxim about Gazprom, while “and to speculate on how quickly American gas will drive out Russian from Europe.
Let us also try to figure out whether it is worthwhile for Russia and China to prepare for unconditional surrender.
Those who know little English and have bothered to listen to Trump’s thematic speeches could have noticed that he never, simply never ever uses the definition of “American gas” as applied to LNG exports.
Mr. Trump, as a mastodon of world politics, understands the meaning of each of his words and assesses the consequences of each incorrect formulation. It is noteworthy that Mr. Trump uses only the phrase “gas produced in the US”. It would seem, a trivial matter, but the devil, as you know, lies in the details.
To date, in the United States, natural gas liquefaction plants are exactly … one. It is located in the state of Louisiana, called the Sabine Pass and belongs to the shares of the American company ExxonMobil. The plant was built under the guarantee of long-term contractual obligations with a number of international companies. According to the terms of construction, liquefaction of gas at the plant in priority order is carried out in the interests of various buyers. ExxonMobil itself can use the production infrastructure to its own advantage at no more than five percent of the total. The maximum annual productivity of Sabine Pass is 20 billion cubic meters, you can easily calculate which part belongs to the American company.
Further it is necessary to understand that all gas produced in the USA belongs not to any state, but to private traders. A private company may go on for some time in the wake of the state policy, but in the end it will always remember its main task – making a profit, and the degree of loyalty to the state machine will start to fall precipitously.
In 2017, the union of European states “ate” 510 billion cubic meters of gas. That is, even if we imagine that the United States will divert all gas produced in its territory to the Old World, having refused much more favorable supplies to Asia, all this gas will cover only 3.9 percent of the total demand. In reality, things are even more fun. For 2017-2018 from the US conditionally American LNG to Europe was delivered 2.6 billion cubic meters. That is, its share in the European market with a total consumption of one trillion 20 billion cubic meters in two years is a negligible 0.25 percent.
The statements of Mr. Junker generally do not lend themselves to logical comprehension. I recall that after the meeting with Trump, he said that the EU will consider the issue of building an additional eight or ten LNG terminals specifically for receiving “conditionally American” gas. The statement is simply stalled, because today on the coast of Europe there is a whole bunch of similar terminals. Their total receiving capacity is about 200 billion cubic meters. In practice, their workload in 2016 was around 18 percent, and in 2017 – about 23 percent. It turns out that two-thirds of the European Union’s capacity is either idle, bringing losses, or suspended until better times.
Increase the supply of conditionally US LNG to Europe is unlikely to work either. It is necessary to understand that the European gas market almost all the year round is losing to the markets of the Asia-Pacific region in terms of product prices. For example, now the consumption of gas in Europe has fallen, but in Asia, because of the heat, it has increased in leaps and bounds. Banal physics – cooling requires a much higher consumption of energy than heating.
If we go over the price dynamics in these two regions, say, in the last two months, then we will see that collective Asia buys all gas, at least Russian, even American, on average 20-25 percent more expensive than Europe. Rhetorical question: where will it be supplied by private producers?
In order not to be accused of bias, let’s look at the official statistics of the US Department of Energy.
In the period from February 2016 to June 2018, the States supplied gas:
– to East Asia and the Pacific region – 15.9 billion cubic meters (40.8% of all supplies);
– in Latin America and the Caribbean – 12.8 billion cubic meters (32.9%);
– to the Middle East and North Africa – 3.9 billion cubic meters (10.2%);
– to Europe and Central Asia – 3.8 billion cubic meters (9.9%).
Even if you fall into fantasy and imagine that all this gas from the United States to the last molecule at the expense of profits and logic will be redirected to Europe, the latter will not at all save it.
As we recall, the European Union needs 510 billion cubic meters of gas in the gas, and the European Energy Commission forecasts that this figure will grow by an average of five percent per year, and by 2030, the EU will need to have an order of magnitude to support its industry and livelihoods 700 billion cubic meters. Today, Russia supplies the Old World with more than 200 billion cubic meters, that is, more than a third of its needs. The United States, respectively, less than one percent.
Separately, we should mention the main parameter of competition – the cost of the proposed product. Given that between the Sabine Pass plant in Louisiana and the contingent buyer in Europe is a number of intermediary companies, the cost of the delivered LNG will be at least 30 percent higher than that of the pipeline gas. In one of his speeches, the head of Gazprom Alexei Miller generally called the figure at 50 percent, and the author of these lines strongly suspects that Alexei Borisovich knows what he is talking about. Russia, in the person of Gazprom, does not have the slightest disagreements with European buyers, all contracts are met scrupulously.
The PRC is one of the main consumers of natural gas in the world, and there are also a lot of misconceptions about this country.
To begin with, China is quite vigorously extracting gas. In 2005, its own production was 50 billion cubic meters, and by 2016 this figure has grown to 120 billion cubic meters.
The PRC does not disdain any energy sources and launches both conventional gas extracted on the continental shelf, and methane accompanying coal deposits, and shale fuel. Actively explored and potentially oil and gas bearing areas in the sea. According to the estimates of China National Petroleum Corporation, by 2020 China will produce 170 billion cubic meters of its own resources, 20 of which will account for methane from coal fields.
In connection with the growth in production, China’s dependence on gas imports has been increasing. So, as of the end of 2017, the country’s need for gas imports was estimated at 91 billion cubic meters (since 2015 there has been a doubling). But here it is necessary to take into account that already in 2019 the IHP “Siberia Power”, whose design capacity is 38 billion cubic meters, will work. Thus, the PRC, which has good relations with Russia today, will cover more than a third of its needs in one fell swoop.
As for LNG, the situation here is much more complicated. Today, China ranks third in the world for the import of liquefied gas, second only to Japan and South Korea. But even here there is one little-known fact. The main supplier of LNG to China is not the US, but Australia (43 percent of total imports). To reduce dependence on external suppliers, China bought several gas liquefaction terminals abroad, in particular, in Qatar and Australia, and also built more than ten own receiving terminals, and the same number is being built.
As far as in such conditions, the US can dictate its gas will to the “red dragon”, we think, it is quite understandable.