No Competition: Why US LNG No Match for Russian Natural Gas in Europe

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No Competition: Why US LNG No Match for Russian Natural Gas in Europe
Published 23-08-2017, 07:00
Russian natural gas is still incredibly popular in the EU regardless of Washington's attempts to displace Moscow and occupy the European energy market, Davide Tabarelli of Nomisma Energia research company told Sputnik.

Despite US efforts to isolate Europe from Russia, the latter will remain one of the EU's major suppliers of natural gas for decades to come, Davide Tabarelli, the head of Nomisma Energia, an independent research company that deals with energy and environmental issues, told Sputnik Italia.

Tabarelli pointed out that Europe has recently become the main arena of the political struggle between Washington and Moscow.

"Europe is of particular interest [for the US and Russia] because of its wealth, culture, history, and the energy industry. Russia receives considerable financial resources by exporting gas to Europe," he said.

The expert noted that Italy has fallen prey to the US political ambitions along with other European states.

"Italian companies Eni, Saipem, Bonatti and other are involved in big energy projects such as [Russia's] Nord Stream," Tabarelli told Sputnik, "There were also South Stream and Turkish Stream [pipeline projects] and here one should say about the strategic defeat of Italy in the field of energy — the issue which remains largely neglected. Several years ago South Stream was considered to be an optimal solution to construct a gas pipeline bypassing Ukrainian and to strengthen relations with Russia."

"However, this project was abandoned," the Italian expert said, "This was a great loss for both [Italian] and European companies [in general]."

Tabarelli said that despite the crisis simmering in Ukraine, Russia continues to deliver natural gas to the EU without interruption.

"Despite the [anti-Russian] sanctions and other difficulties, Russia remains the main supplier for one simple reason: Russia is Europe, it is located closer [to the EU] than other [suppliers]. In addition, Russia, like Iran, is ranked first in terms of natural gas reserves," the Italian expert explained.

Whether one likes it or not, Russian natural gas will remain off the charts in Europe, according to Tabarelli.

"Russia has huge reserves of natural resources, including gas, which production costs much lower than that in the US," he stressed. "[Therefore], Europe will continue to import natural gas from Russia."

"Russian gas will be much more competitive [in the EU]," the expert believes, adding that the additional costs of extracting, transporting, exporting, liquefying and regasification of the American LNG, simply mean that the price is much higher than the same product from Russia.

More importantly, the energy sector will continue to be of strategic importance for Europe since the sustainable development of the EU's economy largely relies on uninterrupted energy supplies.

"In the future, energy issues will become even more connected to the policy and strategy of a state," Tabarelli believes.

The European energy market has become yet another "battle ground" for Washington and Moscow: the US is trying to displace Russia as the main supplier of natural gas to the EU.

In June the US began exports of liquefied natural (LNG) gas to Eastern Europe with first LNG cargo arriving in Poland on June 8. Accordingto Bloomberg, Polish state-owned company PGNiG SA opened an LNG trading office in London in February, aiming to make Poland "a gateway for American LNG to central and eastern Europe."

However, Russia's supplies of natural gas are far more "convenient" and cheap in comparison with America's LNG. It is no secret to the Europeans that the cost of transportation and regasification of the American LNG is rather high.

The latest package of anti-Russian sanctions is aimed, in particular, against the country's energy sector and, most notably, the Nord Stream-2 project. In raising these sanctions, Washington is seemingly attempting to undermine Russia's energy market leadership in the EU.

But it's not just Moscow that will feel the pain, the restrictive measures will deal a heavy blow to the EU economy given the fact that Russia is providing up to 35% of all gas imported by Europe, according to Bloomberg.

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