American LNG Has Good Immunity to Global Tariff Bidding

Multilateral tariff bidding, the establishment of new trade exchange rules, and uncertainty in the markets and the economy in general have so far had limited consequences, partly due to the fact that oil and gas are significantly exempt from the new tariffs imposed by President Donald Trump, as well as the countermeasures introduced by some of the involved parties in response. This is favorable for Croatia and Europe, as the EU has significantly reduced its dependence on Russian gas due to Russian aggression in Ukraine, which has largely been replaced by American LNG. Considering that the increase in fossil fuel prices due to additional tariffs would raise energy costs in Europe and reduce the volume of American gas sold, it is clear why these energy sources have good immunity in the current trade war and why there are no indications that they will become one of the weapons in it.

Already in the early days of the new tariff regime, the White House officially announced that oil, gas, and refined products are exempt from the new tariffs. It is favorable for Croatia that LNG, or liquefied petroleum gas (LPG), is exempt from trade wars, as two-thirds of its gas at the Terminal in Omišalj, managed by LNG Croatia, comes from the USA.

– We are monitoring the development of this situation regarding tariffs, but we cannot comment on them, nor can we lobby for them, nor can we influence the price in any way, as we are not sufficiently qualified in the field of trading LPG and natural gas, and our opinion in this case is not authoritative. Currently, the share of LPG from the United States at the LNG terminal is 66 percent, and this figure is expected to grow after the capacity expansion project of the LPG Terminal – stated LNG Croatia to Lider.

In the MET Group, which operates in Croatia and several other European countries, they were somewhat clearer and warned about what the realization of fears that LNG would fall under new tariffs would bring. Due to rising energy prices, the competitiveness of the European industry would be compromised.

Krk Terminal Very Important

– At this stage, there are no official indications that LNG is being considered as part of a potential European Union response to the new American tariffs. It should be noted that the import of LNG from the USA and other countries is crucial for the European industry, which, under the influence of high energy prices, is becoming less competitive than the USA or Asia. Tariffs on American LNG would increase import prices, which would consequently harm the competitiveness of the European industry – stated the MET Group.

Like other players using the terminal in Omišalj and Croatian pipelines for LNG trading, the MET Group assessed that the Krk terminal is very important for the security and diversification of supply for the entire region, as it is not possible to import American LNG without them. There is political will, evident in the fact that Croatia has decided to expand the capacity of its LNG terminal in Omišalj from the current 2.9 to 6.1 billion cubic meters of gas per year, and will invest a total of 180 million euros in this, of which 25 million will be invested in expanding LNG capacity, and 155 million euros in expanding the gas pipeline network. This investment also implies commercial interest, and so far, as we can see, there is interest on the USA – EU route, as LNG is exempt from tariffs.

Last year, American LNG accounted for about 18 percent of total European gas imports, and in the structure of LNG imports, American sources accounted for 40 to 45 percent. The share of Russian gas in total European imports was about 18 percent. Norway is the largest gas supplier to the EU, with a share of about 31 percent.

According to forecasts from the U.S. Department of Energy, their total LNG exports are expected to continue to grow, solidifying their position as the world’s largest LNG exporter. Consultants estimate that LNG has strategic importance in future trade and political relations between the EU and the USA.