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U.S. Natural Gas Exports Deal Blow to State-Owned Russian Company

New natural gas burning plant in Kentucky
New natural gas burning plant in Kentucky / AP
• September 22, 2014 2:49 pm

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American liquefied natural gas exports are reducing revenues at Russia’s state-owned natural gas company as the United States looks to punish the country financially for its invasion of Ukraine.

Increased U.S. exports combined with a supply glut enabled by innovative extraction techniques such as hydraulic fracturing have flooded European markets with cheap gas, the Financial Times reports.

Gazprom, Russia’s state-owned natural gas company could lose as much as 18 percent of its revenue as a result of US exports.

European consumers can expect to pay 11 per cent less for their gas as a result of the downward pressure on world prices created by rising US LNG exports, hitting revenues of the Russian state-controlled gas group, according to an analysis published on Monday by the Center for Global Energy Policy at Columbia university. […]

The US shale revolution, caused by advances in production techniques from reserves that were previously not commercially viable, has boosted the country’s gas production and created expectations that the country could become a significant exporter of LNG, at prices that will be competitive in world markets.

European nations are still expected to purchase large quantities of Russian gas, but experts predict that increased U.S. supply will dent Russian influence in the region.

Jason Bordoff, a former White House energy official now at Columbia University, said the lost revenue would be "a big deal for Gazprom". […]

Even if the gas price falls, Europe is likely to remain heavily dependent on imports from Russia, because it is among the region’s lowest-cost suppliers.

Published under: Oil, Russia