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US LNG shipments to Europe spiked in November amid dispute with China

U.S. exporters of LNG looked increasingly to Europe in November 2018 as shipments to China continued to lag during a trade war between Beijing and Washington, according to figures released by the U.S. Department of Energy.

China remains an important LNG player globally as the world's second largest importer of LNG and the main growth market for the commodity, which is why the ongoing trade dispute by the U.S. and China has created uncertainty for the industry. On Sept. 24, 2018, China put a 10% tariff on U.S. LNG cargoes in retaliation for a 10% tariff the U.S. placed on a basket of Chinese goods.

After China imposed the tariff, its next cargo of LNG from the U.S. did not arrive until Nov. 11, 2018. The vessel carrying that cargo had departed from Cheniere Energy Inc.'s Sabine Pass terminal in Louisiana in October 2018. It was one of two U.S. shipments that month that departed from the Cheniere facility to China, according to DOE figures. In November 2018, just one cargo departed for China carrying about 3.4 Bcf. It also left from Sabine Pass.

But the November 2018 data from the DOE showed the volume of U.S. LNG export cargoes remained robust and headed to destinations such as the United Kingdom, which received six cargoes totaling about 20.7 Bcf worth of natural gas. That about doubled the overall amount of American LNG that the U.K. has imported from the U.S. since Sabine Pass shipped the first LNG cargo from the Lower 48 in February 2016. At the end of November 2018, the U.K. stood as the twelfth overall greatest buyer of U.S. LNG in that nearly three-year time period, overtaking countries including Kuwait, Portugal, Taiwan and Italy.

France, Spain, the Netherlands and Poland also brought in U.S. LNG in November 2018. France took three cargoes, totaling about 10 Bcf. The Netherlands took one, for about 2.9 Bcf. Poland also received one, importing about 3.3 Bcf that shipped from Dominion Energy Inc.'s Cove Point LNG terminal in Maryland.

Poland in November 2018 entered into an energy cooperation pact with the U.S. that included increasing Polish imports of LNG. The effort was part of the Trump administration's push to increase European imports of U.S. LNG amid trade tensions between the U.S. and Europe and concerns over Europe's dependence on Russian gas supply. Still, relatively little U.S. LNG reaches Europe, where regasification plants have been underused as expansions of these facilities have far exceeded demand for LNG imports.

The European Union received 37% of its gas imports from Russia in 2017, according to figures from the European Commission.

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Even with the spike in shipments to Europe in November 2018, some of the biggest buyers of U.S. cargoes were in major Asian markets. South Korea imported five cargoes totaling about 17.6 Bcf worth of LNG. The country overtook Mexico in October 2018 as the greatest overall importer of U.S. LNG over the last three years.

Japan, the world's greatest LNG importer, brought in seven cargoes from the U.S. that carried a total of about 23.8 Bcf in November 2018.

Other notable developments in November 2018 included the first shipment of U.S. LNG since February 2016 to Jamaica, which took about 1.3 Bcf.

The U.S. LNG shipments to Europe in November 2018 highlighted another way the U.S.-China trade war can affect flows of the commodity, as discussed in a recent report from the Atlantic Council. While the Atlantic Council forecast that the trade tensions and tariffs will strongly impact U.S. LNG producers, the American exporters "can find profitable markets in Europe, other Asian countries, and Latin America, which in turn could displace Qatari, Australian, or other suppliers, who could sell their gas to China instead."

"Hence, the impact of tariffs on U.S. firms in China would be minimal," Jean-François Seznec, a senior fellow with the Atlantic Council's Global Energy Center, wrote in the report. "The displacement of Qatari LNG in Europe or Latin America could actually allow the U.S. suppliers to increase their margin due to lower shipping costs."

"On the other hand, China could lose some of its ability to diversify its supplier base, risking higher costs and security of supply," Seznec said.

Total LNG exports from the U.S. in November 2018 amounted to about 107.4 Bcf, up from about 89.8 Bcf the previous month. Monthly export totals stand to increase in 2019 with the addition of Cheniere's Corpus Christi LNG export facility in Texas and a fifth train at Sabine Pass. Three other developers have edged closer to starting up U.S. LNG export projects.