Medvedev: ‘US using cheap gas to prop up economy’
The US government is keeping domestic gas prices lower than the rest of the world in a bid to stimulate its economy, Gazprom’s deputy chairman Alexander Medvedev claimed in a keynote address
Earlier this year, US gas prices fell to 10-year lows of under $2.50 per million British thermal units (Btu) after a huge ramp-up in the country’s shale-gas production depressed prices. Asian prices, meanwhile, have climbed to around $18/million Btu, driven by Japanese demand after it shut its last nuclear reactor on 5 May. European prices are around $9/million Btu.
“Prices in East Asia are significantly higher than the European level, not to mention American prices, which are actually behind a protective barrier of government policies aimed at using natural gas as a means to restart the American economy,” Medvedev said.
He added that it was the US policy to become self sufficient in hydrocarbons and that the growth of liquefied natural gas (LNG) is not enough to unite the global gas market.
“Despite the power of globalisation, in reality, there are three regional markets today: North America, Europe and East Asia. Each of these markets retains its regional identity,” Medvedev said.
“Global LNG supplies are not yet able to satisfy requests to organise gas-to-gas competition at a level sufficient at a global scale.”
With more LNG producers and buyers around the globe expected to double the size of the market in the next decade, gas prices might be expected to converge due to the physical link between countries if traded volumes become high enough.
The US is also expected to become an LNG exporter due to low gas prices, with seven projects proposed. It would overtake Qatar as the world’s largest exporter with over 100 million tonnes a year (t/y) liquefaction capacity if all projects go ahead, but US petrochemical firms and utilities have lobbied for gas exports to be limited.
Cheap energy and feedstock chemicals, such as ethane, would make US manufacturing competitive in a global market place, the companies argue.
In another panel session, Chevron said the US could become addicted to cheap gas.
“Some people have pointed out we’re addicted to gas, and at these prices, the addiction is just getting stronger,” Chervon president of global gas Gregory Vesey told delegates.
Chevron's Vesey told Petroleum Economist that it believed a free market that would allow gas to be imported, stored, or exported as opportunities allowed would be best, but added that “development of US natural gas resources will enhance US energy security”.