EU softens concern over US LNG, pushes for crude

OREANDA-NEWS. October 23, 2015. The EU is downplaying concerns about facilitating US LNG exports but still is pushing for the lifting US crude export restrictions.

The EU, in the latest round of free trade negotiations with the US, continued to argue for a dedicated energy chapter to guarantee unrestricted access to US natural gas and crude, EU energy union commissioner Maros Sefcovic said today.

The latest round of the Transatlantic Trade and Investment Partnership talks taking place in Miami, Florida, began on 19 October and will wrap up on 23 October.

EU negotiators are less concerned about access to North American LNG exports than the had been in the past because the US already has authorized a large amount of LNG exports to all international markets, Sefcovic said at a Washington, DC, forum hosted by think tank the Petersen Institute for International Economics.

US negotiators at previous round of talks over the trans-Atlantic partnership agreement have been reluctant to discuss binding commitments in the free trade talks that remove legal restrictions on natural gas and crude exports. The US Trade Representative's office was not immediately available to comment on the current round.

The EU will push for access to US oil and natural gas resources and it hopes the US will have "more negotiating capacity" now that the Trans-Pacific Partnership talks have concluded, Sefcovic said.

"We see an encouraging sign [in the number of LNG export licenses] as it is the first symbol that the US is entering the global market as an energy superpower," he said.

The US is now building five LNG export projects with peak capacity of 71mn t/yr (9.1 Bcf/d), approaching Qatari output of 77mn t/yr. Total capacity approved by US regulators for exports to all destinations is 110mn t/yr (14 Bcf/d). Many more are awaiting approval or have received more limited export licenses valid for countries with which the US has free trade agreements.

Only 18 countries have preferential terms of LNG trade with the US, none of them in Europe. LNG exports from the US to countries lacking a free trade pact with Washington have to undergo a much tougher review process.

The first LNG cargo will ship from Cheniere Energy's newly built Sabine Pass export facility on the Louisiana Gulf coast later this year. But developers will need a number of years to finish other terminals already under construction.

Lifting the US restrictions on crude exports remains an important objective, according to Sefcovic, with the EU calling for unfettered access to natural resources with all other trade partners. But he acknowledged the political difficulty of the issue in the US.

"It is a sensitive subject but it presents a big opportunity for the US in Europe," he said. "We have seen what alternative [crude and natural gas] supplies have done in Europe."

He cited Lithuania's ability in May to cut the price of natural gas imported by pipeline from Russia after the completion of an LNG import terminal.

LNG volumes at export terminals under construction in the US have been committed under long-term contracts to buyers in Europe, Asia and Latin America. EU consumers should benefit from US exports even if they head to other global markets, Sefcovic said.

Eastern European members of the EU for years have pushed for an easier process for approving LNG export licenses. Bills proposed in the US Congress would make it easier to approve exports to NATO members because of energy security concerns, but none have succeeded in becoming law so far.

Some proponents of crude exports have made energy security arguments in favor of lifting restrictions. "We know [US] allies would pay a security premium to have that supply," Producers for American Crude Oil Exports executive director George Baker told Argus. But the political discussion in the US Congress has focused on the economic and environmental implications of the move.

The US House of Representatives on 9 October approved a bill that would lift 40-year-old restrictions on exporting crude. The chances for passing the bill are tougher in the Senate, and the White House has threatened a presidential veto.

US crude production since 2008 has increased by nearly 90pc, reaching 9.4mn b/d over the first half of this year, according to the US Energy Information Administration.