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    France to Import Natural Gas "Made in the USA"



In France, gas companies cannot explore nor exploit unconventional resources but French households will soon use LNG from the United States.

by: Kevin Bonnaud

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Shale Gas , Liquefied Natural Gas (LNG), Top Stories, Security of Supply, France

France to Import Natural Gas "Made in the USA"

"Not in my backyard..." In France, gas companies cannot explore nor exploit unconventional resources since the anti-fracking law passed in 2011 but French households will soon use liquefied natural gas from the United States to fulfill their energy needs. 

Starting from 2018, Engie (ex GDF Suez) customers will use natural gas from two American liquefaction plants – primarily Corpus Christi, currently under construction, and Sabine Pass.

On October 28th, it was announced that French company Engie had signed a 5-year deal with Cheniere Marketing International LLP. As a result of that deal, Engie will purchase 12 cargoes of liquefied natural gas each year. It’s a significant development given the fact that the French state owns a third (32.76%) of Engie. Last July, EDF closed a similar agreement with Cheniere. State-owned company EDF (85%) will buy and provide to its customers an average of 770,000 tons of LNG every year for 20 years starting in 2019. 

Diversify and secure gas supplies
Those trade agreements underline an overall energy policy aimed to diversify French supplies and limit the growing influence of Russia in the European energy market, Engie says. “Importing US LNG will help to strengthen the security of supply across Europe”, says Pierre Chareyre, Executive Vice President in charge of Engie's global gas and LNG business line.

Currently Russia is France's second largest gas supplier, amounting for 20% of imports in 2013, according to a report by INSEE, France’s national statistical institute. Russian exports have increased by 25 points in a one-year period. Supplies from Algeria jumped, too, by 30%  between 2012 and 2013. Norway is still France’s number one provider with 40% of gas supplies despite a 7% decrease. Gas imports from the Netherlands, also in decline, came in third behind Russia.

The newly signed agreements by EDF and Engie reinforce the strategy of diversification while countering Russia’s new ambitions, according to one energy expert. “Russia is a key provider of gas but France is less dependent on Russian exportations than others European countries thanks to an old energy policy of diversifying the sources of gas supplies. The United States offers a new opportunity to expand this policy of diversification which is already significant," Francis Perrin, chairman of the Strategy and Energy Policies Centre, who teaches at the International and Strategic Relations Institute, told Natural Gas Europe recently. 

Limit the growing influence of Russia
However, preventing Vladimir Putin’s Russia from playing a growing role in Europe in terms of energy represents a much bigger challenge for the European Union, Mr. Perrin says.

“Recent U.S. administrations have warned their European allies about the risks of being too dependent on Russia," he said. "Russia's recent actions on the world stage have been disturbing if not against western interests whether it’s in Ukraine and Crimea, in Syria or even in Eastern Europe."

Currently, the European Union is looking for alternative routes for gas supplies: the Caspian Sea to transport resources from Azerbaijan; the Eastern Mediterranean where both Israel and Cyprus will soon become gas exporters; and to East Africa, Mozambique and Tanzania, which will also export Liquefied Natural Gas. 

Meanwhile, Russia plans to increase gas exportations towards Europe in terms of volume and market shares. Gazprom is proposing new projects to provide energy in Europe. “[That includes] Turkish Stream, even if the implementation remains uncertain, and Nord Stream 2, a pipeline project parallel to the existent North Stream, which connects Russia to Germany through the Baltic Sea," Mr. Perrin says.

He says  the situation could end up with both “a strong political and trade confrontation” between the three players: The United States, the European Union and Russia. 

Shale gas and energy dependency
France depends entirely on the rest of the world when it comes to fulfilling the energy needs of French households. 98% of the gas used daily in France, or 491 billion Kwh (INSEE study for 2013), is imported. However, there is a way France could potentially reduce its energy dependency and its energy costs: by developing unconventional resources such as shale gas. The United States, because of the development of unconventional resources, is now self-sufficient in gas and will soon become a net explorer of natural gas. “The U.S. market no longer exists for traditional gas exporters. [That's] a big shift from the early 2000s when Gulf countries expected to massively export their resources to the United States," he explained.

In France, that can't happen unless the country's anti-fracking law is struck down. That is very unlikely at the moment given the current political environment. French President François Hollande has made it clear on various occasions that there will be no shale gas explorations or developments under his tenure.

NGE asked Mr. Perrin for his take on this controversial issue in France. "The decision was not the best in my personal view. Actually, François Hollande is respecting a law passed before his election by his predecessor Nicolas Sarkozy. We will see [after] the outcome of the next presidential contest in 2017 whether the next government will handle the issue, especially if the right come back to power."

The debate is buried for now in France. But other countries are at least thinking about following the example set by the United States. Francis Perrin mentions “Poland, the United Kingdom, Germany, which has not closed the door, Argentina, Australia with coal gas, Saudi Arabia, United Arab Emirates, Algeria (despite a strong opposition), Tunisia and Morocco”.  

That’s a lot of countries. Time will tell if France has or will make the right decision. But if a European country can successfully develop its unconventional resources, it could be a game changer for countries hesitant or strongly opposed to shale gas. 

Kevin Bonnaud