Contracted buyers of US LNG in Europe, such as France's Engie and Spain's Gas Natural, could bring their volumes to their own home markets in the next few years as an expected widening of the Henry Hub/oil spread makes US LNG more attractive, a senior official from US LNG pioneer Cheniere said Wednesday.
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Speaking at the LNGgc conference in London, Cheniere Marketing's Genevieve Solomon also conceded that US LNG exports were "less compelling" now because of the oil price fall than had been the case when most of the US LNG export projects were sanctioned.
Cheniere began exporting LNG in February this year, but out of the 30 or so cargoes exported to date, only two have come to Europe.
This is partly due to the low gas prices in Europe and a pick-up in Russia, Norwegian and Algerian pipeline supplies.
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Solomon said that by 2018 or 2019, US LNG is expected to be cheaper than the oil-indexed gas in Europe.
This, she said, should incentivize some of Cheniere's contracted buyers to bring gas to Europe.
"If you consider where the oil price is expected to be, they should want to take some of their US LNG over oil-indexed gas," she said.
"So I wouldn't rule out US LNG being taken into the home markets of those that have signed the contracts," she said.
Many of the offtakers of Cheniere's US LNG are portfolio players -- the likes of Shell -- and Solomon said more cooperation with these types of companies helped to share the risk of sending LNG to new markets.
New markets are opening up across the world for LNG, but many of the new countries buying LNG -- such as Egypt, Jordan and Pakistan -- have relatively low credit ratings.
This can mean difficulty in agreeing financing for new LNG projects, she said, pointing to past issues finalizing a long-time US LNG supply contract with Lithuania's Litgas.
Solomon said the LNG industry should work with traders and portfolio players who are "better able to handle the risk" of new markets.
"The industry is trying to work together to share the risk and companies are going downstream to be in that particular market to handle the risk," she said.
"It's a challenge, and the banks and industry players will have to work together to manage that."
--Stuart Elliott, firstname.lastname@example.org
--Edited by Alisdair Bowles, email@example.com