28 July 2018, News Wires — Frankfurt/London: President Donald Trump’s plan for “vast amounts” of U.S. liquefied natural gas (LNG) to be sold to the European Union after trade talks with its top representative faces a reality test.
After a meeting at the White House with European Commission President Jean-Claude Juncker on Wednesday, Trump said the EU would also buy more U.S. soybeans and work with Washington to cut other trade barriers to zero.
“European Union representatives told me that they would start buying soybeans from our great farmers immediately. Also, they will be buying vast amounts of LNG!,” Trump wrote in a Tweet.
Juncker said the EU would build more terminals to handle America’s LNG.
It appeared that a major LNG deal between the trading partners had been struck.
In reality, three-quarters of Europe’s existing import facilities lie empty while demand for U.S. LNG on the continent remains limited.
The most lucrative markets for U.S. LNG are in South and Central America, India and the Far East, with Europe near the bottom of the pile given its relatively low prices and ample supplies of gas via pipelines from Russia and Norway.
Global gas price signals determine LNG trade flows, Royal Dutch Shell Chief Executive Ben van Beurden said on Thursday.
“Will U.S. LNG reach Europe? Yes, but only if there is an arbitrage opportunity that makes sense,” he said.
Politicians have little sway over this. The EU applies zero tariffs on U.S. LNG imports, so cutting them is not an option to boost trade in any future U.S.-EU talks.
Europe’s declining domestic production of gas from the North Sea, Netherlands, Germany and Norway leaves a growing gap for Russia and potential LNG suppliers in the United States to exploit.
EU gas production will halve by 2040, the International Energy Agency says.
By then, 84 percent of gas will be imported against 71 percent 2016, it says, although it could be less if green energy expands faster and energy efficiency gains reduce the need for gas.
Trump told reporters on Wednesday that Europe would be a massive buyer of LNG to diversify its energy supply – “And we have plenty of it.”