Greetings from London,Quick Note: This week’s Premium covers the future of the LNG industry very closely, as Dan Dicker looks at the winners and losers of the U.S. shale gas boom so far and the Executive Report reveals how floating liquefied natural gas technology, like the Independence, is changing the game. Alongside this, Martin Tillier reveals hidden investment opportunities in the downstream segment and James Hyerczyk looks at whether crude oil prices will begin to rally in November. Read this letter and receive the next 4 weeks research completely free – click here to receive the reports.Onto the news:A small nation is standing up to the bullying tactics of its would-be oppressor. It’s an engaging narrative that is playing out in the Baltics as Lithuania is seeking to break free of its reliance on Russian energy.Foreign Policy reports that the presence of a new LNG terminal at the Lithuanian port of Klaipeda means the “Baltic countries have thrown up a gleaming steel gibbet to dissuade Russia from using energy to hold the region hostage.” After all, even the name of the terminal, Independence, screams defiance.In the wake of the Ukrainian crisis and protracted Russian threats to suspend the delivery of gas to Europe, this is an important step in defusing this option. The 1,000-foot terminal will allow Lithuania, Latvia and Estonia to break their utter dependence on Gazprom for gas. Alone, Independence could supply 4 billion cubic meters of gas a year, providing more than 75 percent of the current demand in all three nations.This sends a clear message to Moscow that its intention to use natural gas as a geo-political weapon can be thwarted. If evidence of this was needed, Lithuanian President Dalia Grybauskaite explained that his country had made a “bold yet timely decision to begin an independent and fast construction of the LNG terminal” to no longer pay the highest rates in the EU for Gazprom gas.The New York Times calls Lithuania an example of how to break Russia’s grip on energy and that “even countries that are bound by geography and history to Russia’s energy behemoth can find alternatives.” It goes on to explain how Grybauskaite already won significant concessions from Gazprom in May, when the Russian firm agreed to slash gas prices for Lithuania by 20 percent. This was not enough for Vilnius, who can now completely free themselves from Gazprom’s grip, should they so choose.Lithuania’s strategy is well in line with what analysts recommend for the EU. A paperpublished earlier this month by the Oxford Institute of Energy Studies stated that “LNG imports, which are generally viewed as being able to provide immediate and diverse supplies, are frequently regarded as the most promising alternative source of non-Russian gas supplies to Europe.” This would put paid to EU scrambles to get pipelines connected to other natural gas producers such as North Africa, Azerbaijan or Iran. On top of the physical cost and maintenance of such connections, these countries either present significant geopolitical risks of their own or are within or close to Russia’s sphere of influence. One only has to look at the stuttering oil exports from Libya and Egypt amid the chaos of recent months to see how natural gas supply could similarly be affected.Although Foreign Policy acknowledges that the new terminal is not “a silver bullet for the region’s energy woes”, it is worth noting that plenty of Northern and Eastern European countries are lining up to follow suit. Bloomberg states that, despite a 13 percent cost increase to $762 million, Poland’s LNG terminal at Swinoujscie will be ready to go by mid-2015. A month ago, the Finnish government announced a 200 million euro investment to build three new LNG terminals from scratch, with Helsinki’s Minister of Economic Affairs Jan Vapaavuori stating this would spark the beginning of a series of terminals along the Finnish coast. Estonia, Croatia, Greece, and Cyprus are all set to follow suit.This LNG boom in Europe ties in nicely with the U.S. boom in shale gas, which needs somewhere to go. Earlier this year, Eastern European states made a direct appeal to Washington to pick up the slack and export LNG to them directly. The Visegard Group (made up of the Czech Republic, Hungary, Poland, and Slovakia) dispatched a letter to Congress, saying that “the presence of U.S. natural gas would be much welcome in central and Eastern Europe, and congressional action to expedite LNG exports to America’s allies would come at a critically important time for the region.” Although U.S. Secretary of State John Kerry told the EU last year not to expect any LNG exports before 2015, we can expect a more precise timetable to soon be confirmed.With U.S. energy consumption levels shrinking, it makes complete sense for Washington to militantly seek for the country to become a net LNG exporter as fast as possible. In December 2012, the Department of Energy stated that LNG exports to countries with which the U.S. does not have free trade agreements, which includes the EU, could bring in an extra $30 billion a year. In September, Bloomberg announcedthat new, major exports of LNG were being planned to India and Japan. Therefore, an increase in American free market ideals, helping European allies, and breaking Russia’s stranglehold on natural gas exports make increased exports to Europe a very likely option in years to come. Watch this space.For this week's special report please go to the second part of the letter (below the premium box.)That’s all she wrote from us this week, we look forward to getting back to you with more insightful info next Friday,Best regards,James StaffordEditor, Oilprice.com[/table][/table]
LNG Price at posting:
$3.72 Sentiment: Hold Disclosure: Held
