Gazprom Expects Tough U.S. Competition for European Gas Market

Russian gas major Gazprom said on Thursday that U.S. exports of liquefied natural gas (LNG) to Europe will be its main competition for this year, business newspaper Vedomosti reports.  The statement marks an abrupt change of tone from Gazprom toward gas supplies from the United States.

“It is obvious that LNG will be the main rival in the battle for the European consumer,” Sergei Komlev, the company’s head of contracts structuring, said in comments published in Gazprom’s corporate magazine on Thursday.

Gazprom has previously dismissed concerns that U.S. LNG supplies to Europe could have an impact on its business, with officials saying that Russian gas will always be cheaper than imports from the United States.

U.S. LNG has flooded Europe since October last year, reshaping gas flows on the continent and leading to high storage levels and narrower price spreads.

Komlev agrees that for Gazprom’s pipeline gas, the main rival in the fight for the European consumer for will be LNG. In 2019, 50 billion cubic meters of new liquefaction capacities are expected to be put in operation, with most of them being introduced in the United States.

“The main risk for Gazprom is a strong slowdown in the Chinese economy and a revision of Beijing’s policy on switching to gas,” says Dmitry Marinchenko, director of the Russian division of Fitch. Under this scenario, there will be much more free LNG in the market. According to the expert’s estimates, purchases of liquefied gas by Europe can grow by 20–30 billion cubic meters (bcm) by the end of 2019. The share of these volumes will cover a possible reduction in production, but a significant part will compete with Russian gas, Marinichenko said.