Portugal has on Tuesday received the first cargo from Cheniere’s Sabine Pass LNG export terminal in Louisiana. This is the first U.S. LNG cargo produced from shale gas to reach Europe.
The sixth Sabine Pass commissioning cargo has been brought onboard Teekay’s MEGI-powered LNG carrier, Creole Spirit. The 174,000 cbm capacity Creole Spirit left the Sabine Pass liquefaction and export facility on April 15.
The vessel arrived at the Sines LNG terminal on Tuesday afternoon, a spokesman for Portugal’s Galp Energia, the buyer of the LNG cargo, confirmed to LNG World News on Wednesday.
“The cargo of about 1 TWh is equivalent to 1% of Galp’s yearly gas purchases. It amounts to about one week of Portugal’s domestic consumption, or 2% of the country’s total consumption last year, and will be used to serve the company’s Iberian clients,” the spokesman said.
Houston-based Cheniere started exporting LNG from Sabine Pass in February, a major milestone in global LNG trade as the U.S. is set to become a net exporter of domestically sourced shale gas.
However, this will not be the first shipment of U.S. shale gas to Europe as the Swiss-based Ineos said in March it had delivered the first-ever cargo of shale gas-sourced ethane to Europe.
Europe is the third continent to receive LNG export volumes from Cheniere’s Sabine Pass plant following South America and Asia.
More U.S. LNG to Europe
Cheniere has signed long-term contracts with a number of European companies, including BG Group, now part of Hague-based LNG giant Shell, Gas Natural, Centrica etc.
Cheniere’s LNG exports alone will not have a big impact on the European gas market, at least not for now, but as several more LNG export terminals are under construction along the Gulf Coast, things could change dramatically.
LNG imports to Europe are poised for the second year of growth following three years of declines from 2011 to 2014.
Europe’s role as a “key backstop for excess cargoes” in the global LNG market is likely to expand as other consuming regions are unable to absorb new demand as quickly as supply is being added, the International Gas Union said in its latest World LNG Report. The introduction of US LNG in 2016 marks the launch of another supply source for Europe given that the Pacific Basin is “better balanced in the second part of this decade, and US LNG is regarded as highly flexible,” the IGU said.
On the other hand, up to half of US LNG exports to Europe could be shut-in over the next five years, depending on the prices of oil and coal and Russia’s export strategies, according to Wood Mackenzie.
Wood Mackenzie said in a report in March that Russia’s export strategy has a major influence, however, prices of other commodities like oil and coal are more likely to have a stronger effect on US LNG exports. Coal prices could have the most impact since it “will determine European spot prices through coal-gas switching in the power sector.”
In a low oil price environment, Russia’s gas indexed to oil will allow it to retain over 30 percent of the European market, around 490 billion cubic meters, according to Wood Mackenzie. As Russian gas would remain cheap, buyers would maximise the offtake, threatening US LNG export volumes.
“In case the prices of coal also remain low, it could push the European gas prices to US$3.85/mmbtu. This, in turn, would see the US LNG export capacity averaging 85 percent between 2017 and 2020,” Wood Mackenzie said.
LNG World News Staff