Originally Posted by
Dayuhan
This argument is getting way too much play, much of it from people who should know better. US gas exports are not going to rescue Europe.
It is true, and much said, that the US is the Saudi Arabia of natural gas production. It is also true that the US is... well, the America of natural gas consumption. Gas available for export is not a factor of production, it's a factor of production minus consumption.
The US does have a glut of gas right now, but that is likely to be transient. The glut exists because US capacity to produce gas grew faster than US capacity to use gas. Gas makes a great substitute for oil, but it's not an instant substitute. You can run a car on CNG or LNG, but it requires an expensive conversion or a new car, and nobody will switch unless fueling infrastructure is in place: no matter how cheap gas is, you don't by a CNG powered car if there are no filling stations in your area. If a utility is running a half dozen oil powered plants, they can't just switch to gas because it is cheap. They have to build gas fired plants and decommission those oil plants, which is a large capital expenditure. If a homeowner has a furnace that runs on oil, same problem, on a much smaller scale.
If domestic gas stays cheap, people and companies will switch, over time, and US consumption will grow. Of course gas producers want to export right now, because world prices are higher than US prices. Whether that would be good for the US is another question altogether. In any event, the bottom line is that while the US may be able to export some gas at some point, it's not going to replace Russia in Europe's supply matrix.
The real impact of US gas production in world markets will be displacement. As the US becomes self sufficient in gas, the 45 billion cubic meters of gas that the US imported in 2012 will become available for other countries to buy. The other up and coming factor in world markets is Australia, which has gas and is investing in major export facilities. That will go to Asia of course, but it will leave Qatar looking for other export markets, and Europe is the obvious one. If sanctions ever come off Iran, you're looking at a potential global gas glut... for a while at least.
However - and it's a big however - Europe cannot simply switch from Russian gas to Qatari gas, or US gas. Russian gas is piped direct, the potential replacements will arrive as LNG, in tankers. Europe does not currently have the LNG terminal capacity to replace Russian gas with LNG imports. For Europe to wean itself from Russian gas, the constraint is not just finding the gas. Europe will need to make major and rapid investments in new LNG terminals and in linking those terminals to their current east-facing pipeline networks.
If Germany really wants to knock Gazprom stock down, they should announce plans for a major LNG import terminal.
Of course in the long run the Russians can always pipe gas to Asia... but that's a big capital expenditure as well, and a considerable technical challenge.
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