US Energy Advantage Vis A Vis Europe

The Financial Times is reporting:

The US shale gas revolution is forcing a redoubling of efforts by European chemical producers to move away from low-margin petrochemicals and focus on higher margin speciality products.

European petrochemical makers risk being squeezed between low-cost producers in the Middle East and a resurgent chemicals industry in the US, where feedstock and energy prices have plummeted following shale gas discoveries.

The big story:

After a decade of almost zero capacity expansion in US petrochemicals, shale gas has prompted the likes of Dow Chemical, LyondellBasell, Chevron Phillips and ExxonMobil Chemical to invest billions of dollars in ethane cracker capacity on the US Gulf Coast.

Fresh US supplies of petrochemicals – primarily ethylene derivatives such as polyethylene and PVC – will hit global export markets in coming years. Meanwhile, Middle Eastern chemical companies that have long had a big feedstock and energy cost advantage over Europe may struggle to export to a more competitive US and seek European customers instead.

Environmental concerns and greater population density have so far prevented Europe developing its own shale gas reserves, which threatens to leave European chemical producers at a competitive disadvantage in the near term. Natural gas prices in the US are roughly a third of the Europe price.

But now a contrarian view. Jeffrey Rubin over at The Huffington Press suggests it is only a matter of time before Europe starts drilling for natural gas. 

Once fracking technology opens up shale gas reserves overseas, why wouldn't the onset of new production have the same dramatic effect on prices in the rest of the world as it has in North America? If that happens, why would Asian countries want to import expensive LNG from across the Pacific? Taking it a step further, why would anyone want to build a pipeline across B.C. to Kitimat to supply an albatross of an LNG plant that will be lucky to scrape by with economics that will suddenly have become exceedingly marginal.

The shale gas revolution in North America reversed the polarity of global LNG flows. The spread of the shale gas revolution to Asia and Europe could have just as big of an impact. Will North America's LNG hopes, from plants to pipelines, soon become obsolete?

Won't happen in my investing lifetime.