President Donald Trump’s plan to make the EU build more terminals capable of handling American liquefied natural gas (LNG) is facing a reality check. Following Mr. Trump’s meeting with EU Commission President Jean-Claude Juncker, Washington is hoping that the EU would also import more US soybeans and work with Washington to cut other trade tariffs. “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!,” Mr. Trump tweeted.
However, while it appeared back in Washington that an immediate LNG deal would be struck soon, the truth is that about 75% of Europe’s existing facilities are idle while the demand for American LNG remains tepid. The most advantageous markets for US LNG are in South and Central America, India and the Far East with Europe being near the bottom of the demand curve due to its relatively low prices and abundant supplies of gas imported from Russia and Norway. At the recent NATO summit, Donald Trump criticized Germany for its plan to construct the Nord Stream 2 gas pipeline since this would kill the US strategy to export LNG to Europe.
“Will US LNG reach Europe? Yes, but only if there is an arbitrage opportunity that makes sense,” Royal Dutch Shell Chief Executive Ben van Beurden said. Currently, European tariffs on US LNG imports are zero, so cutting them is not an option to boost trade in any future US-EU talks. Europe’s decreasing domestic output of gas from the North Sea, Germany, Norway and the Netherlands created an increasing gap for Russia and potential LNG suppliers in the United States to exploit.