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US LNG cargo lands in Turkey, first market with direct Russian competition


A third cargo of US LNG has arrived on European shores, the Sestao Knutsen earlier this week unloading at the Turkish LNG import terminal at Aliaga.

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The tanker was one of the last to load at Cheniere Energy's Sabine Pass export facility in the Gulf of Mexico before the two-train plant was shut down for planned maintenance in mid-September.

The arrival of US LNG into Turkey marks a step change in flows into Europe.

The previous two cargoes were both delivered to the Iberian Peninsula -- the first in April to Portugal and the second this summer to Spain.

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Neither country is supplied with pipeline gas by Gazprom.

But the start of US LNG exports to Turkey is arguably of more importance given that Russia supplies significant volumes of gas to the Turkish market.

In the first half of 2016, Gazprom piped 12 Bcm of gas to Turkey, making it the Russian company's third biggest customer after Germany and Italy.

Turkish relations with Russia deteriorated sharply at the end of last year with the downing by Ankara of a Russian fighter jet near the Syrian border.

But following an apology for the incident by Turkish President Recep Tayyip Erdogan, ties were mended and the two sides began to work quickly on realizing the planned TurkStream gas pipeline from Russia to Turkey.

US LNG exports to Europe remain a rarity -- of the now 31 cargoes loaded since exports began in February, it is only the third.

But one other LNG tanker from Sabine Pass is currently in European waters -- outside the bunkering port of Kalamata in Greece.

The Maran Gas Delphi arrived at Kalamata on Monday, but its next destination is as yet unclear.

The majority of US LNG cargoes have gone to South America. But cargoes have also been shipped to China, India, the Middle East and recently to Mexico and the Dominican Republic.

Delegates speaking at the S&P Global Platts European Gas Summit in Dusseldorf this week were not optimistic about the chances of US LNG making waves on the European market given the low cost Russian gas alternative.

"It will not be a tsunami of US LNG [in Europe]", Vattenfall's Head of Continental Power Trading Frank van Doorn said.

BP's Head of Russia & CIS Economics Vladimir Drebentsov added: "Russian gas production costs are very low, among the cheapest in the world. My thinking is that Gazprom will undercut US LNG -- letting the [US)] LNG set the price."

--Stuart Elliott,
--Edited by Jeremy Lovell,