Europe is unlikely to veer from its current plans to build a small number of new plants for importing liquefied natural gas, energy experts said, casting doubts on President Trump’s claims Monday that he had secured commitments from the European Union for the construction of nine to 11 plants to boost U.S. exports.
In comments at the end of a joint news conference with Italian Prime Minister Giuseppe Conte on Monday, Trump portrayed the commitment as a victory in his “fantastic meeting” with European Commission President Jean-Claude Juncker last week.
But while there have already been about a dozen proposals on the drawing boards, no more than three or four new plants will be built anytime soon. That’s because the existing 24 LNG import facilities now operating in Europe are running at about a quarter of their capacity, said Thierry Bros, senior fellow at the Oxford Institute for Energy Studies.
What’s more, there are limited tools the E.U. can use to speed up construction of new plants by private companies.
“We have enough capacity. We may need a little bit more in some dedicated areas. Otherwise I don’t see how we can need 11” new plants, Bros said. “There may be a few more to be needed such as one in Croatia. But all the others are there, and at end of day it is private money going into it even if regulated.”
LNG will also have to compete against three large gas pipeline projects — two from Russia and one from the Caspian Sea. The NordStream 2 will deliver gas from Russia to Germany.
The TurkStream will bring gas from Russia to Turkey and then Central Europe, circumventing Ukraine. And the Shah Deniz 2, which just started transporting gas from the Caspian to Turkey, will be extended into Greece, Albania and Italy.
“The E.U. does not decide how many LNG terminals to build; those are commercially driven decisions,” Jason Bordoff, director of the Center on Global Energy Policy at Columbia University, said in an email. “Those that are built will source gas from the most competitive sources, which may or may not be U.S. LNG. The market will decide whether the E.U. takes more LNG from the U.S., not Juncker.”
Over the past three years, Europe’s gas consumption has grown 17.5 percent to 470 billion cubic meters, Bros said. LNG imports accounted for 12.5 percent of that total, and they will increase as Europe’s domestic gas production declines and as consumption grows. Existing facilities for the import of LNG could meet 40 percent of current European demand.
During his visit to Washington last week, Juncker was more circumspect than Trump about plans for new port facilities. “We are ready to invest in infrastructure and new terminals which could welcome imports of LNG from the United States and elsewhere — but mainly from the United States, if the conditions were right and prices competitive,” Juncker said in a July 25 speech at the Center for Strategic and International Studies.
According to the law firm King & Spalding, there are two LNG terminals under construction in Spain.
LNG faces stiff competition from Russia, where the costs of production are very low. In addition, the cost of shipping gas by pipeline is much less than the cost of liquefying natural gas, sending it by special tanker and turning it back into gas form.
Total chief executive Patrick Pouyanné said during a recent visit to Washington that U.S. shale had set a “ceiling” on Russian gas prices by establishing a price at which U.S. gas is available. But that doesn’t mean Russia won’t undercut the United States or other LNG exporters.
Even among LNG producers, there is a lot of competition. Qatar and Australia are the biggest exporters and will rival the United States even after new U.S. export facilities come online. And if prices rise, that might justify more rapid development of major discoveries off the east coast of Africa.
The plans for major LNG expansion in Europe and Asia also run afoul of some activists in the United States who say the exports will leave U.S. consumers vulnerable to international swings in prices. Last week, the Industrial Energy Consumers of America filed comments on an Energy Department study that said gas prices could double by 2040 thanks in part to export growth.
“IECA is not against LNG exports,” the group said. “We are against excessive LNG exports which would result in U.S. prices being dictated by global demand like crude oil is today.”