We had written before about the boondoggle of US LNG sales to Poland. Now that Poland has its LNG terminal set up, they are trying to sell the world the fairy tale that this US gas, which is produced, stored and shipped at exorbitant prices, is cheaper than gas delivered by pipeline from Russia without special fracking or cryogenic treatment and storage in expensive terminals. Yeah right.
Below is our translation of the story from a Russian online news site.
The prices of American LNG and Russian gas were compared in Poland
Poland will buy gas from the United States. The contract for the supply of American LNG was signed the day before. The annual volume of gas supplied to Poland will amount to 2 million tons. The contract is for 20 years. The head of oil and gas company PGNiG, Piotr Woźniak meanwhile compared gas prices from the United States and Russia and came to the following conclusion.
The supply of American liquefied gas will cost the country less than Russian gas. The purchase price of gas from the United States is almost 30% lower than in Russia.
There are three possible explanations for the report that US LNG shipped to Poland is cheaper than Russian gas.
1.— Without mentining it, Woźniak was in fact slyly comparing Russian LNG and US LNG, rather than Russian gas delivered by pipeline and US LNG. This would be an irrelevant comparison because Poland had been buying the very cheap Russian gas delivered by pipeline, with which US LNG cannot possibly compete – unless, of course, it is subsidized by the US, in violation of WTO rules. And that is a very real possibility thanks to the new tax reform.
2.— Piotr Woźniak is lying to induce other suckers in Europe to buy US LNG, as part of a secret deal with the US.
3.— The tax credits to gas companies under the 2017 “tax reform,” initially giving one-time tax credits to the CEOs of gas companies thanks to taxpayer generosity will be extended so that the US can be Great Again at taxpayer expense for at least the next 20 years. If this is the case, then the inherently extravagantly expensive LNG will be sold at a permanent discount and the taxpayer will simply stay on the hook for the price difference. This rotten scheme is not the way to grow an economy. It can only serve the purpose of putting Russia out of business and making Americans poorer. But since it violates the WTO rule banning subsidization of exports, it can easily be challenged in court.
Every single one of the reader comments on this article expressed disbelief with this report, showing that ordinary Russians are smarter than Polish officials. Here is a translation of my comment posted at the site:
There are several processes that make American LNG much more expensive than Russian pipeline gas, and this is a constant that cannot be changed.
One: this gas is produced by hydraulic fracturing, which is more costly, because 1. it requires an expensive additional process and 2. the gas field lasts a very short time, requiring frequent opening of new fields and redrilling.
Then, after the gas is extracted, it must be processed cryogenically and compressed into a giant storage terminal.
After that, it must be transferred to a vessel equipped with giant storage domes, and sent abroad to a similar storage terminal. The gas must then be regassified by heat exchange, usually against sea water, and injected into the transport network.
The only reason why this gas could possibly cheaper is that the US government subsidizes it. This subsidy is indirect and based on a 2017 tax reform, which gives tax breaks to gas companies that show low or zero profits. Of course, the taxpayer pays for it. In fact, the WTO (World Trade Organization) does not allow subsidization of exports, and Russia can therefore sue the United States for the unfair loss of its market share.