Imports of liquefied natural gas (LNG) are widely thought (and not without reason) to be an important part of the solution to Europe’s energy crunch. This summary (courtesy of the U.S. Department of Energy) helps explain why.
An extract:
Liquefied natural gas (LNG) is natural gas that has been cooled to a liquid state, at about -260° Fahrenheit, for shipping and storage. The volume of natural gas in its liquid state is about 600 times smaller than its volume in its gaseous state. This process makes it possible to transport natural gas to places pipelines do not reach.
Liquefying natural gas is a way to move natural gas long distances when pipeline transport is not feasible. Markets that are too far away from producing regions to be connected directly to pipelines have access to natural gas because of LNG. In its compact liquid form, natural gas can be shipped in special tankers to terminals around the world. At these terminals, the LNG is returned to its gaseous state and transported by pipeline to distribution companies, industrial consumers, and power plants.
LNG is thus, as I have mentioned before, a global product. But the transportability that enables it to be used to help out Europe comes with an in-built complication: Europe is not the only part of the world chasing after LNG. I also mentioned that there has been tough competition for LNG between Asian and European buyers this year, and that this would only be likely to intensify. European demand for LNG has already surged, and it is likely to increase further as most Europeans face the reality that Russian gas won’t be returning in the near future, and construct new floating or fixed import capacity.
Adding floating capacity is the quickest way to achieve that, but there’s also the construction of new export facilities to consider. The U.S. became the largest exporter of LNG in the world in the first part of the year (exports rose by about 12 percent over the period), but adding much more to American export capacity will take time. In a report from late July, Reuters noted that the U.S, would not be able to add “substantial” further capacity until 2024, just another data point that reminds us that even if Europe manages to cope relatively well with the absence of Russian gas this winter (something that should not be taken for granted), there is the following winter to consider too: There won’t be any Russian gas to fill up storage facilities that will have largely been depleted by the spring. Qatar, another major exporter, is also expanding its capacity, but that, too, will take time.
Ever helpful, Vladimir Putin has offered to resume the supply of gas to Europe through the one Baltic pipeline that survived the recent sabotage (which rendered the two Nord Stream 1 pipelines inoperable for at least a year but, mysteriously, spared one of Nord Stream 2’s as yet unused pipelines). Germany, which hosts that pipeline’s western terminal, has rejected the offer, but it was interesting to read, at any number of levels, that Putin also suggested creating a new European gas hub in Turkey. It was no less interesting to read this in another Reuters report (emphasis added):
Turkish Energy Minister Fatih Donmez, speaking at the same conference in Moscow, said the idea was new to him but should be discussed.
Turkey, for those who may have forgotten, is a member of NATO and, incidentally, is, along, ahem, with Hungary, one of only two NATO members that have yet to ratify the treaty change that would allow Sweden and Finland to join the Atlantic Alliance.
However, the creation of such a Turkish hub would take some time, even if it were ever to be economically and politically feasible.
In conclusion, the squeeze arising out of increased LNG demand is not going away any time soon. Some customers will be worse affected than others.
Europe’s thirst for LNG is having negative consequences for countries in other parts of the world which already import the super-chilled fuel in large volumes. Prices are soaring and less LNG is up for grabs on the market, making it a much less viable option for poorer countries.
“The way in which Europe has been able to source these volumes is by paying more than other markets are willing to pay for,” Alex Munton, an LNG analyst with energy research group Rapidan, told DW.
The ICIS figures [showing ithe surge in demand for LNG in Europe] confirm the extent to which LNG demand has fallen in countries outside of Europe, particularly in Asia. In Bangladesh, demand is down 10% compared with 2021; in Pakistan it’s down 19%, while in China there is a 22% drop.
The consequences for certain countries are stark. Last week, Bangladesh suffered its worst blackouts in almost a decade, with more than 100 million people left without power for several hours. For months, Bangladesh has been struggling to secure enough gas on global markets.
Mohammad Tamim from BRAC University in Dhaka says the blackouts in Bangladesh are connected to energy shortages, although a bigger reason is that the national electricity grid needs to be upgraded.
“Mostly it’s a system operating challenge,” he told DW. “The independent system operation has not been updated, and we need a smart grid because larger power plants are coming in.”
Nonetheless, he said countries such as Bangladesh, Pakistan and India have been significantly affected by the changes to the LNG market in 2022.
“Europe is trying to grab every molecule of gas wherever it is available,” he said. “They are purchasing everything from current to future gas. And their purchasing power is much higher than that of developing countries. So obviously, countries like Bangladesh, India, and Pakistan have been hit very hard.”
Pakistan is in the midst of a severe energy crisis and last week it emerged that it had failed to attract a single bid from suppliers for a tender to supply one cargo of LNG per month for between four and six years. For months, Pakistan has also struggled to buy LNG on the shorter term spot markets.
The malign consequences of Russia’s war on Ukraine continue to ripple out.
Meanwhile (and via the Daily Telegraph), news from what ought to be a parallel universe, but is not:
Conservative rebels are plotting with the Labour Party in an attempt to stop new fracking wells.
Sir Keir Starmer’s party is planning to force a vote on the [British] Government’s decision to lift the moratorium on fracking and hopes to force a defeat in the House of Commons.
Rebel ringleaders believe more than 35 MPs could vote against an amendment to energy legislation that would bring an end to new developments…