Trump to promote U.S. natgas exports in Russia's backyard

[July 04, 2017]  By Roberta Rampton and Timothy Gardner

WASHINGTON (Reuters) - President Donald Trump will use fast-growing supplies of U.S. natural gas as a political tool when he meets in Warsaw on Thursday with leaders of a dozen countries that are captive to Russia for their energy needs.

In recent years, Moscow has cut off gas shipments during pricing disputes with neighboring countries in winter months. Exports from the United States would help reduce their dependence on Russia.

Trump will tell the group that Washington wants to help allies by making it as easy as possible for U.S. companies to ship more liquefied natural gas (LNG) to central and eastern Europe, the White House said.

Trump will attend the "Three Seas" summit - so named because several of its members surround the Adriatic, Baltic and Black Seas - before the Group of 20 leading economies meet in Germany, where he is slated to meet Russian President Vladimir Putin for the first time.

Among the aims of the Three Seas project is to expand regional energy infrastructure, including LNG import terminals and gas pipelines. Members of the initiative include Poland, Austria, Hungary and Russia's neighbors Latvia and Estonia.

Trump's presence will give the project a lift, said James Jones, a former NATO Supreme Allied Commander.

Increased U.S. gas exports to the region would help weaken the impact of Russia using energy as a weapon or bargaining chip, said Jones.

"I think the United States can show itself as a benevolent country by exporting energy and by helping countries that don’t have adequate supplies become more self-sufficient and less dependent and less threatened," he said.

Trump's Russia policy is still taking shape, a process made awkward by investigations into intelligence findings that Russia tried to meddle in the 2016 U.S. presidential race. Russia denies the allegations and Trump says his team did not collude with Moscow.

Lawmakers in Trump's Republican Party, many of whom want to see him take a hard line on Russia because of its interference in the election and in crises in Ukraine and Syria, support using gas exports for political leverage.

"It undermines the strategies of Putin and other strong men who are trying to use the light switch as an element of strategic offense," said Senator Cory Gardner, a Republican from Colorado who is on the Senate Foreign Relations Committee.

The Kremlin relies on oil and gas revenue to finance the state budget, so taking market share would hurt Moscow.

"In many ways, the LNG exports by the U.S. is the most threatening U.S. policy to Russia," said Michal Baranowski, director of the Warsaw office of think-tank the German Marshall Fund.

COMPETITIVE ARENA

The U.S. is expected to become the world's third-largest exporter of LNG in 2020, just four years after starting up its first export terminal. U.S. exporters have sold most of that gas in long-term contracts, but there are still some volumes on offer, and more export projects on the drawing board.

A general view shows the construction site of Poland's first liquefied natural gas (LNG) terminal, in the Baltic port of Swinoujscie July 23, 2014. Picture taken July 23, 2014. REUTERS/Filip Klimaszewski/File Photo

Cheniere Energy Inc <LNG.A>, which opened the first U.S. LNG export terminal in 2016, delivered its first cargo to Poland in June. Five more terminals are expected to be online by 2020.

Tellurian Inc <TELL.O> has proposed a project with a price tag of as much as $16 billion that it hopes to complete by 2022, in time to compete for long-term contracts to supply Poland that expire the same year and are held by Russian gas giant Gazprom <GAZP.MM>.

"We would like to be a supplier that competes for that market," Tellurian Chief Executive Meg Gentle told Reuters.

A global glut in supply may, however, limit U.S. LNG export growth, regardless of Trump's support.

The glut has depressed prices and made it difficult for LNG exporters to turn a profit, said Adam Sieminski, an energy analyst with the Center for Strategic and International Studies.

Russia has the advantage in Europe due to its proximity and pipeline connections.

"Europe is going to be the great competitive arena between Russian gas and LNG," said Daniel Yergin, the Pulitzer Prize-winning oil historian and vice-chairman with IHS Markit analysis firm.

NORD STREAM

Europeans will be watching to see whether Trump clarifies his administration's position on a new pipeline to pump Russian gas to Germany, known as Nord Stream 2.

The U.S. Senate in June passed a package of sanctions on Russia, including provisions to penalize Western firms involved in the pipeline. The new sanctions have stalled in the House of Representatives.

The U.S. State Department has lobbied against the pipeline as a potential supply chokepoint that would make Europe more vulnerable to disruptions.

The threat of sanctions adds to tensions between Washington and Berlin. Germany's government supports the pipeline, and Trump's position on it is a concern for European diplomats.

(Additional reporting by Jan Pytalski in Washington, Alissa de Carbonnel and Robert-Jan Bartunek in Brussels, Agnieszka Barteczko in Warsaw; Writing by Roberta Rampton; Editing by Simon Webb and Marguerita Choy)

[© 2017 Thomson Reuters. All rights reserved.]

Copyright 2017 Reuters. All rights reserved. This material may not be published, broadcast, rewritten or redistributed.