The collapse of Russian natural gas flows to Europe have given US fuel exports pivotal new importance in the global economy, the head of one of the world’s largest commodities traders has said, signalling a permanent change in the structure of global energy markets.
Torbjörn Törnqvist, chief executive of Gunvor, spoke on Monday just over a year after Russia’s full-scale invasion of Ukraine. Russia has since cut gas exports to the EU by about 80 per cent.
He said that Russia’s decline as a crucial supplier is putting more onus on US liquefied natural gas exports to plug the gap.
“The world will not be able to live without US LNG,” Törnqvist said. “It’s the balancing factor.”
Törnqvist and other senior executives spoke on the first day of the CERAWeek conference in Houston, an annual energy industry gathering. Swiss-based Gunvor on Monday said it had struck a preliminary deal with US gas producer Chesapeake Energy to buy 2mn tonnes of LNG annually for 15 years from 2027.
The agreement would link the value of LNG exports from the US directly to markets in Asia, where prevailing prices are far higher than those in the US.
Mike Wirth, the chief executive of Chevron, told the gathering that rising dependence on US LNG exports was increasing the pricing power of US shale gas producers.
Gas markets had “structurally changed for the long term” after the Kremlin’s decision to invade Ukraine, Wirth said. Europe was not “going to go back to its reliance on Russian gas”.
Törnqvist warned that Russia would be forced to shut huge gasfields that had supplied Europe for decades because they lacked sufficient links to other big markets.
“It has to be shut in. It’s a big loss for Russia,” Törnqvist said.
Trading houses earned bumper profits in LNG trading last year by buying low-priced US gas to sell in Europe, where prices soared as high as $100 per million British thermal units.
On Monday the US gas benchmark, known as Henry Hub, was trading at $2.56 per mmbtu, also well beneath Asian LNG prices of about $14 per mmbtu.
The agreement between Gunvor and Chesapeake suggests shale producers are determined to capture a bigger share of higher prices internationally.
Nick Dell’Osso, Chesapeake’s chief executive, said that the price gap would remain an advantage for US shale producers and exporters, but also bring international pricing into the US market.
“The economics of the US natural gas market are going to be influenced more and more by international markets as more gas is delivered internationally,” Dell’Osso told the Financial Times in Houston.
The White House and European Commission last year announced a deal under which the US would try to increase exports of LNG to Europe. Törnqvist said Europe’s effort was working.
“They now have enough capacity to import the gas that is now lost probably forever from Russia — or a very long time at least,” he said.
