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For 1st time ever, Europe is top destination for US LNG in Q1


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For 1st time ever, Europe is top destination for US LNG in Q1

EU countries imported record volumes of U.S. LNG in March, with the trade bloc serving as a market of last resort for uncommitted cargoes as a mild winter and global oversupply depressed LNG prices in Asia.

The European surge in March showed in figures from the U.S. Department of Energy and the European Commission. The March volumes rounded out the first quarter ever in which Europe was the top destination for U.S. LNG, dating back to the first export from the U.S. mainland in February 2016, according to an analysis by Nikos Tsafos, a senior fellow with the energy and national security program at the Center for Strategic and International Studies.

"It does seem we've finally hit that point where there is excess supply, and that supply is going to Europe," Tsafos said. He cautioned not to read much more into the trade flow.

The European Commission boasted in a May 14 statement about the growth in LNG trade between the U.S. and the EU as the EU's executive body and the Trump administration continued to advocate for greater shipments of U.S. LNG to Europe. The EU's imports of U.S. LNG amounted to about 49.4 Bcf in March, according to European Commission figures.

The DOE figures, which are different because they show destinations of cargoes departing the U.S. during the month, amounted to about 59.5 Bcf departing for the EU. That volume was about 46% of all U.S. LNG exports in March.

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The trend is striking because, in recent years, relatively little U.S. LNG has reached Europe, where regasification plants have been underused. Capacity provided by expansions of these facilities has far exceeded demand for LNG imports.

Industry experts have cautioned that the promises to send more U.S. LNG cargoes to Europe could bump up against governments' limited influence over LNG trade and market realities. But the surge in spot shipments could appear to align with those aims, which coincided with trade tensions between the U.S. and Europe and concerns over Europe's dependence on Russian supply.

"Transatlantic cooperation on LNG is a perfect match," European Commission Vice President Maroš Šefčovič, who is in charge of the energy union, said in the statement. "Europe has an attractive, well-integrated gas market that is ready to welcome more competitively priced LNG from the U.S. By doing so, we will significantly boost Europe's energy security as well as open new business opportunities on both sides."

On the same day, Šefčovič accompanied U.S. President Donald Trump on a visit to the Sempra Energy-led Cameron LNG export terminal in Louisiana as the newly operational facility prepared to send initial cargoes. The first LNG export cargo from the mainland U.S. in February 2016 came from Cheniere Energy Inc.'s Sabine Pass LNG terminal in Louisiana.

But as the Trump administration pushes for greater exports of U.S. LNG, the country's growing export industry could be threatened by the escalating trade war with China, the world's fastest-growing demand market. China recently raised tariffs on imports of U.S. LNG from 10% to 25%, effective June 1, as part of its retaliation for the Trump administration hiking tariffs on $200 billion of Chinese goods.

In March, zero U.S. LNG cargoes departed for China, according to the DOE figures released May 15.

But other Asian markets continued to help offset the slump in total Asian demand coinciding with China's lack of imports. Japan overtook China in March in terms of overall destinations for U.S. LNG, climbing to third place after two cargoes totaling about 7.1 Bcf of natural gas left for Japan during the month. South Korea's imports remained strong, with five cargoes carrying a total of about 18 Bcf headed for the country.

The top destination country for U.S. LNG during March was France. Six cargoes carrying a total of about 20.8 Bcf headed for the country. The first French imports of U.S. LNG from the Lower 48 began in October.

Other European buyers stepped up during the month. Spain was the destination for about 10.7 Bcf. The Netherlands brought in about 10.5 Bcf. Italy, Poland and the United Kingdom were other notable buyers, as was Belgium, which brought in its first cargo: about 3.4 Bcf shipped from Dominion Energy Inc.'s Cove Point export terminal in Maryland.

All of the French cargoes came from Cheniere plants: four from the company's Sabine Pass terminal and two from its new facility in Corpus Christi, Texas.

Cheniere executives said during a May 9 earnings call that the company expects the slump in LNG spot prices to spur a demand response in Europe and Asia.

"We expect supply to continue to trend upward this year and anticipate Europe will absorb a significant portion of that supply growth," Cheniere Executive Vice President and Chief Commercial Officer Anatol Feygin said.