thanks to Vladimir Putin, the LNG sector in the United States has never been better
By using natural gas to pressure European countries, Vladimir Putin will eventually have the opposite effect: lose his first customer and keep a major US gas company specializing in liquefied natural gas (LNG) shipments happy. . During the first 11 months of 2022, this jumped 137% compared to the same period in 2021, according to data from Kpler, cited by the Reuters office.
In terms of volume, LNG shipments from the United States should exceed 55 billion m3 by 2022, which is two and a half times last year, i.e. an additional 34 billion m3, far above the 15 billion m3 promised by Joe Biden, after the invasion of Ukraine by Russia, on February 24, and the imposition of sanctions against Moscow by Western countries.
And if we take into account American LNG shipments to the UK and Turkey connected to EU countries via gas pipelines, the total volume could reach 75 billion m3, compared to 44 billion m3 in 2021. .
If the President of the United States, Joe Biden, had convinced the Europeans after the invasion of Ukraine by promising them an additional 15 billion m3, double that would eventually be delivered, the American gas companies responded primarily to haggling over the price times 10 in the wholesale market rather than political considerations.
All European countries are scrambling to ensure their gas reserves are sufficiently filled before the start of winter! The high costs that Germany also complained about through the voice of its Minister of Economy, Robert Habeck, spoke about prices “astronomical” and France, especially Emmanuel Macron, during his recent trip to the United States, as high gas prices made his industrial sector less competitive. But on the Washington side, Europeans have been sent back to the classical laws of supply and demand.
35 billion dollars raised in 9 months
For American LNG players, this is indeed a good business. During the first 9 months of this year, the seven major LNG companies generated 35 billion dollars, compared to 8.3 billion dollars during the same period in 2001, an increase of 322%, according to the American Energy Information (EIA).
This is the price one has to pay to free oneself from the good will of the Kremlin. “Russia’s share of gas which accounted for 55% of all European gas imports in early 2022 has been reduced to almost zero”noted in the early years of Josep BorrellEuropean Union High Representative for Foreign Affairs and Security Policy, and Vice President of the European Commission.
Indeed it is not at all clear to find an alternative to the high volumes of Russian gas. The United States alone supplies more than half of LNG imports from European Union countries, even providing the additional 15 billion m3 promised by Joe Biden in mid-August. A boom that has in passing allowed it to become the world’s leading LNG exporter during the first half of this year, overtaking Australia and Qatar. The remaining 15% was sent by Qatar, 17% by four African countries, and another 14% by Russia, according to EIA data.
However, this increase in American LNG shipments occurred with the capacity utilization of seven LNG terminals of 87%, the same as in 2021. On the production capacity side, it only increased 1.9% from November 2021, when gas prices were trending in the last quarter of 2021, long before the invasion of Ukraine.
Less tense situation
And it didn’t have much of an impact because, as a result of the explosion, one of Freeport Texas’s LNG terminals, which at the time represented 20% of the United States’ gas liquefaction capacity, had to be suspended. Three-fifths of its production is destined for Europe. Without this accident, Freeport LNG estimates, exports to the Old Continent would probably have reached 80 billion m3.
Today, the situation is less tense. Stocks have not only been properly replenished, but have also been able to remain high due to the mild temperatures of the last few weeks well above their seasonal norm. A situation reflected by the price which has been divided by 5 since its peak in late August, on the Dutch gas trading platform TTF, the European benchmark, fell to its lowest level since November 2021.
It remains to be seen whether this return to more usual levels of prices will continue over the course of 2023, which is a real test of stock reconstitution for the 2023-2024 winter season. On the United States side, the IEA underlined, there will be no new LNG export capacity this year, for the first time since 2016.
Two new US infrastructure projects have been approved in 2022 but will be out of action for several years. Gas exporting companies measure the risk represented by market surplus on gas prices.
The United States has the capacity to continue to maintain volumes of LNG shipments to Europe this year as it would in 2022. There is no shortage, due to the country’s proven reserves (i.e. exploitable under current technological conditions and prices). increase by 32% between 2020 and 2021, says EIA.
Declining consumption in Europe
Especially since, at the same time, consumption in the EU fell during the year by 25% in October and 23% in November, a study by the Bruegel Institute. This is the result of demand being crushed by the closure of factories that have lost competitiveness due to high prices, in energy-intensive production sectors, such as aluminum manufacturing.
As for this side of the Atlantic, a regasification terminal project is not much in the short term. Only Germany – which does not have one because it relies heavily on gas pipelines from Russia – built one on short notice, in Wilhelmshaven. Managed by the Uniper company, it sees the arrival of December 3rd its first cargo, carrying 170,000 m3 of LNG, was loaded on December 19 at Calcasieu Pass by gas company Venture Global.
Nevertheless, experts believe that the existing infrastructure is adequate, the EU inter-state network allows to transport the necessary gas during the stock replenishment period.
Above all, the war in Ukraine has radically changed the energy situation in the European Union and convinced Brussels to make this crisis an accelerator of the energy transition aiming in particular to do without Russian hydrocarbons. This is the meaning of the REPowerEU plan, which aims to invest more in the production of electricity from renewables (solar and wind), nuclear or even hydrogen than infrastructure dedicated to hydrocarbons.
“With our France 2030 plan, we will continue to invest, innovate and apply ecology on an industrial scale. And after the law aimed at accelerating the spread of renewable energy, the nuclear law will mark the start of the construction of new power plants in our region”recalled Emmanuel Macron, too, during his address to the nation on December 31.
Focus on alternatives
These alternatives, according to research notes from the Bruegel Institute, make it possible to reduce gas demand from the European Union. by 41% in 2030 according to one of the REPowerEU plan scenarios leading to excess gas capacity in Europe. In such a case, the Ukraine conflict would result in the Old Continent breaking free from Russian gas, and within a few years… from American LNG.