2023-04-25 04:12:00
As is the case for oil, the invasion of Ukraine by the Russian army in February 2022 turned the flow map of LNG carriers transporting liquefied natural gas (LNG) upside down. Europe, the first customer of Russian gas, delivered mainly via gas pipelines, had to find alternatives in a few months, boosting its LNG purchases by 60% last year.
Between January and November 2022, Russian gas deliveries (gas pipelines and LNG combined), only represented less than a quarter of imports from the Old Continent, with Norway supplying another quarter and Algeria nearly 12%. The rest (25.7%) (excluding Russian LNG) was LNG mainly supplied by the United States, Qatar and Nigeria, according to the latest data from the European Commission.
US benefits from high prices
The main beneficiary was the United States. They have thus doubled their exports to the European Union between 2021 and 2022. But these new sales were motivated by the geopolitical context and above all by the surge in gas prices in Europe (see graph).
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But these deliveries were not made by increasing production, if not slightly, but by changing the destinations. In 2021, the first customers for US LNG were China, Brazil, Japan, South Korea and India. In 2022, it was France, the Netherlands, Spain, the United Kingdom.
And the first months of 2023 confirm this trend, despite the decline in prices. In March, the largest volumes from across the Atlantic were delivered to the United Kingdom, the Netherlands, Turkey and France, according to data from the American Information Agency. on Energy (EIA).
This predominance of the United States should continue, even if the supply from Africa will increase. Algeria can still increase its delivery capacities via the existing gas pipelines, and certain floating gasification projects will appear between now and 2006, including that of Tortue-Ahmeyim located on the maritime border between Senegal and Mauritaniaor Coral on the coast of Mozambiqueet Marine XII FLNG on the coast of Congo-Brazavilleboth operated by the Italian company ENI. Similarly, the discovery of large gas fields in Namibia heralds promising prospects.
Investors reluctant to invest in projects
Nevertheless, the countries of the continent face certain difficulties. “With a level of investment in gas exploration and production that is barely half of that of the previous decade, and the energy transition that will lower the demand for fossil fuels in the long term, it is unlikely that the situation improves in the short term”relieves the firm Wood Mackenzie in a recent report. Armed conflicts in gas-rich regions, the lack of infrastructure, or the threat of sabotage hanging over those that exist, as well as the growth of local demand for gas to generate electricity reduce the appetite of investors . In addition, the awareness of European countries with the war in Ukraine of the dependence on hydrocarbon imports has prompted the Commission to draw up du plan REPowerEUwhich wants to accelerate the development of renewable energies to replace natural gas in particular in the production of electricity.
Demand for natural gas from European countries is expected to fall by 40% by 2030, according to projections by the Institute for Energy Financial and Economic Analysis (IEEFA). A good indicator is that of regasification capacity projects on the Old Continent. No less than 130 billion m3 of capacity have been announced in the context of the gas shortage panic. 20 billion were quickly put into operation last year, and 50 billion are in the process of being produced at the start of this year, including 23 billion in Germany (which had no regasification capacity before the war in Ukraine), 10 billion m3 in Italy, and 8 billion m3 in Belgium. The International Energy Agency (IEA) estimates that 40 billion m3 of LNG import capacity will have been added between the end of 2021 and the end of this year. We are far from the 130 billion announced.
Especially since the other major importing region, Asia, might reduce its LNG purchases. “High prices and supply disruptions have consequences. In several Asian countries, LNG has gained a reputation as an expensive and unreliable energy. LNG import projects in the region are now facing longer lead times and cancellation risks, as governments in key LNG growth markets devise new policies to limit dependence on gas imports. This clouds the long-term demand outlook in regions where the global LNG sector was counting on robust growth.”, underlines the IEFFA.
Thus, Japan and South Korea, countries that historically import LNG, are accelerating the development of their nuclear, solar and wind energy programs to decarbonize their economy.
China turns to Russian pipeline deliveries
As for China, whose economy was penalized by its “zero Covid” policy, it reduced its LNG purchases by 20% in 2022, due to high prices. It preferred to turn to deliveries provided by Russia via gas pipelines at more attractive prices linked to the loss of its European outlet and its local production.
South Asia (India, Pakistan, Bangladesh, etc.) also reduced purchases by 16% last year, due to the high cost of gas but also to the lack of deliveries from traders who preferred to sell their production cash to increase their profits.
As a result, global natural gas consumption is expected to stagnate this year, at 4.041 billion m3 from 4.042 billion m% in 2022, according to forecasts by the International Energy Agency (IEA). As for production, it should increase slightly, by 2%, from 4.119 billion m3 to 4.128 billion m3.
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