The Newest Battlefield In The European Gas War

Worldwide, LNG prices fell to an unprecedentedly low level from May to June 2020 - the prices for landed sea vehicles still remain below USD 2 per MMBtu, forcing LNG's competitors to counter the trend. The forerunner is the Russian pipeline gas monopoly Gazprom, which expects its exports to grow from 199 to 200 BC. To around 167 BC per year in the past two years. BC will decrease in 2020. The pipeline gas supply to Europe appears to be somewhat paralyzed. At the moment there is little or no possibility of boosting exports, although producers are simultaneously restricting natural gas production to oil. With this in mind, Gazprom strives to beat its competitors in its own territory, as there is no liquefaction facility that can realistically target European customers.
In the first days of June 2020, the Greek industrial holding company Mytilineos announced that it had signed a long-term contract with Gazprom's Gazprom Export trade to import Russian natural gas. The news in and of itself should not be considered surprising - Mytilineos had several short-term contracts with the Russian company in recent years and imported 0.6% in 2019. However, if you wanted to check the details of the business, it becomes much more interesting - the tenor of the deal is valid for 10 years until 2030, ie even longer than the main import contract with Russia, which has a state DEPA until 2026. According to the DEPA contract, Greece has an average 2.5% Chr. Per year imported from Gazprom via the TransBalkan pipeline from the Soviet era.
Figure 1. Russian pipeline gas exports to Greece (in billion cubic meters).

Source: Gazprom.
Neither party provided additional information on the long-term contract, but an increasingly apparent trend in Greece's energy supply provides an apparently accurate explanation of why the Russian gas giant would act now. The thing is, from March to April 2020, these LNG imports to Greece exceeded pipeline deliveries, a traditional Gazprom domain. Prices for landed LNG to Greece started this year at $ 3.5 per MMbtu, fluctuated around the $ 2.5 per MMbtu mark from March to April, and fell below $ 2 per MMbtu in the last days of April and remained unchanged there ever since. Without the increase in US LNG exports to Greece, this could not even trigger a Russian response. Revithoussa has traditionally relied on a combination of LNG deliveries from Qatar, Algeria, Nigeria and Norway.
As mentioned above, the start of continuous US LNG deliveries to Greece is a much tougher reputational damage to Russian energy interests than to Qatar or Algerian deliveries. This year, 13 LNG freight goods have already arrived in Revithoussa. This corresponds to a significant increase compared to the final result 2019 of a total of 3 loads. Starting from a fairly expanded list of LNG hubs (Sabine Pass, Cameron LNG, Cove Point), US LNG questions the Kremlin's claim that the American slate storm cannot replace Russian deliveries - it turns out that this is possible , albeit highly unfavorable market conditions. Instead of the initial question of whether US LNG can reach southern Europe, the problem is that American producers are able to withstand such low gas prices over the long term.
Figure 2. Greece's LNG imports in 2017-2020 (in million tons of LNG).

Source: Thomson Reuters.
The most intensive LNG import dynamics in the history of Greece were recorded in winter 2019/2020. Instead of the usual 2-3 loads per month, the Revithoussa LNG terminal received 5-6 loads per month. Supposedly, this is only the beginning of an upcoming Greek LNG ramp-up, since the neighboring countries in the southern Balkans are turning to LNG supply, the bidirectional lines and the corresponding infrastructure are already in place. The utilization rate of the Revithoussa LNG plant was 7%. Chr. In 2019 was a rather meager 40%. However, this year's statistics will be significantly better unless the LNG market takes an unforeseen turn - the utilization rate in the first quarter of 2020 rose to 63%. LNG is the main source of natural gas imports.
Related: The oil and gas sector could already be in decline in the terminal
The Revithoussa LNG terminal, still the only LNG plant in the Balkans to date, is located 45 km west of Athens and mainly serves the needs of the capital. Simultaneously with the increasing inclusion of Revithoussa, another LNG import facility could be put into operation in Greece, this time the north of the country in the form of the FSRU Alexandroupolis FSRU with 5.5 BC Served annually. The development of a second LNG facility coincides with the completion of the ITUC interconnector by Greece and Bulgaria, which is expected to go into operation in 2021 to enable the cross-border movement of TANAP-supplied Azerbaijani gas. The same route would be used for the quantities from Alexandroupolis (Bulgarian Bulgartransgaz) has already taken a 20% stake in the project company, and the Romanian company Romgaz is also trying.
The Mytilineos deal in and of itself will not bring a major breakthrough in the coming years - the metallurgical and energy-oriented portfolio of the Greek company required around 0.6% in 2019. BC, which corresponds to about 12 to 13% of the country's annual gas consumption. However, this is proof of Russia's renewed interest in the Greek market, a harbinger of the future - be it in the form of advantageous price formulas for pipeline deliveries or even for pure LNG deliveries from reliable sources. The struggle for Russia's share of not declining in the Mediterranean will therefore include Turkey, the hot spot of competition so far, Greece and most likely Italy, as all of them have seen an increase in LNG imports in general and US deliveries in particular to have .
By Viktor Katona for Oilprice.com
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