Gazprom hopes bulk of U.S. LNG flows to be diverted to China, not Europe

Russian gas giant Gazprom hopes China rather than Europe will take the bulk of U.S. LNG volumes after a trade deal between Washington and Beijing, a company official said.

Elena Burmistrova, head of Gazprom’s exporting arm Gazprom Export, also told an investor meeting in New York on Tuesday that weak gas pricing in Europe may curb liquefied natural gas (LNG) supplies to the region.

Sales in Europe is a key source of income for Kremlin-controlled Gazprom, which faces lower prices and rivalry from other sources of gas, such as LNG, in Europe.

U.S. gas producers are counting on LNG exports to continue their stellar growth in the coming years to absorb record amounts of gas associated with oil produced from shale formations. The trend threatens Gazprom’s dominance in Europe.

U.S. LNG exports jumped 53% in 2018, 68% in 2019 and are expected to rise 30% in 2020.

China has restarted talks with U.S. liquefied natural gas marketers to buy more LNG following the Phase 1 accord between the two countries.

Burmistrova said the arrival of new LNG capacities from the United States was a negative factor for gas prices in Europe.

“However it doesn’t mean that all the volumes would end up in Europe. In particular, the Phase 1 of the trade deal between the U.S. and China enables the purchase of energy resources from the United States by China in the amount of $52 billion in the coming two years,” she said.

She also said Gazprom’s exports to Europe fell in January, year-on-year, due to high level of storage in the region amid the warm winter.

Burmistrova added that Gazprom was closely watching developments in China where its biggest importer of the fuel suspended some LNG purchases amid weaker demand and a global glut provoked by the spread of coronavirus. (Reporting by Vladimir Soldatkin; editing by David Evans)

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