As winter approaches, a global battle for LNG has begun

As winter approaches, a global battle for LNG has begun

Since the beginning of the conflict in Ukraine, on February 24, they have become more visible near the European coasts. On their way to Asia, these LNG carriers, factory ships, with large refrigerated tanks, used to transport gas over long distances, are now often “rerouted” from Asia to an Old Continent thirsty for gas, after Moscow ceased deliveries. Since the start of the war, the European Union (EU) has increased its imports of liquefied natural gas (LNG) by around 60%, particularly from the United States.

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This great upheaval in gas flows illustrates a fact: a global battle for LNG has begun. “After the tragedy [nucléaire] from Fukushima [en 2011]LNG had already made it possible to cushion the shock”, says Thierry Bros, professor at Sciences Po, energy expert. Europe then sent this liquefied gas to Japan and used Russian gas instead,” he recalls. Today, a twist in history: “If Europe has been able to replenish its gas stocks so quickly, it is thanks to the LNG that it has diverted from Asia, and this, by paying a high price for it, even if it means causing “blackouts” in other countries, such as India and Pakistan. »

Australia

Malaysia

Russia

Qatar

Nigeria

Trinidad
and Tobago

United States

Japan

Korea
from South

China

India

Taiwan

France

UK

Spain

Algeria

Senegal

United States

China

Europe

Algeria

Qatar

Russia

Africa

traditional gas

Regionalized market and land transport

Main gas pipelines

closed or limited due to the war in Ukraine or other diplomatic tensions

Liquefied natural gas (LNG)

An alternative to diversify suppliers

LNG terminal

liquefaction (export)

Liquefied natural gas (LNG)

An alternative to diversify suppliers

LNG terminal

regasification (import)

Liquefied natural gas (LNG)

An alternative to diversify suppliers

Main sea routes LNG

Liquefied natural gas (LNG)

An alternative to diversify suppliers

in billions of cubic meters (m3), in 2021

The rise of the United States

Since the exploitation of oil shale, the country is the leading producer of hydrocarbons, ahead of Saudi Arabia and Russia. In 2016, the first gas liquefaction plant paved the way for exports, and terminals have since multiplied in the Gulf of Mexico.

China’s opportunistic game

China is the world’s largest importer of LNG. During the first half of 2022, Beijing sold 4 million tonnes of American or African LNG to European states. Several LNG carriers have turned back to the EU. But, with the approach of winter, Beijing could keep its orders and increase competition on the gas market.

The opportunity for Europe* to get out of the Russian trap

LNG imports increased by 60% in the first half of 2022, exceeding those of Russian gas. But Eastern Europe, very dependent on Russia, has little or no access to the sea. Germany has a coastline, but no regasification plant. Spain has six terminals, but not enough pipelines to transport gas to the rest of the European Union (EU).

* European Union plus United Kingdom

The good deal for Algeria

First African exporter of gas, Algeria delivers Europe by gas pipeline. But since the diplomatic crisis with Rabat at the end of 2021, Algiers has cut the pipeline that passes through Morocco. The development of liquefied gas would enable Algeria, the EU’s fourth LNG supplier, to no longer depend on its neighbour.

Qatar’s long-term strategy

The world’s second-largest LNG exporter after Australia, the emirate mainly delivers to Asian countries, under long-term contracts in which European players have long refused to commit.

Russia’s energy blackmail

Main source of gas for Europe, Russia has limited its deliveries since Western sanctions linked to the invasion of Ukraine. This energy blackmail is pushing Europeans to look for other partners and to turn to LNG.

The new attraction of Africa

Africa’s gas potential is of interest to Europeans, who come up against insecurity (piracy in the Niger delta, jihadist attacks in Mozambique and the Sahel) and competition: deliveries of gas from new offshore fields in Senegal ( 2.5 million tons of LNG per year at the end of 2023) are largely pre-empted by Asian customers. Asia now accounts for 73% of global LNG demand.

Sources: “BP Statistical Review of World Energy 2022”; International Gas Union (IGU), “World LNG Report”, 2022; Knowledge of energies

Infographics The world : Victoria Denys, Francesca Fattori, Benjamin Martinez, Delphine Papin and Floriane Picard

Is this scenario tenable in the longer term? As winter approaches, Asian countries will also need to replenish their stocks, which should not fail to exacerbate international competition. South Korea, where legislation requires stocks to be 90% full by the end of October, will have to import more. For its part, Japan, very far-sighted, has already filled them above the average of the last five years. But what about China?

More CO2

“It’s the great unknown, emphasizes Vincent Demoury, General Delegate of the International Group of LNG Importers, everything will depend on the weather, whether the winter is mild or not, and the impact of the Covid-19 pandemic on industrial activity. » But also the revival of its coal-fired power plants. “It is not excluded, if the prices favor it, that Beijing decides to continue to operate its coal-fired power stations while supplying gas from Central Asia and Russia, as it has done in the latter month “, continues this specialist.

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Because, if the United States exports more of its gas, mainly from shale, the real winner in this crisis remains unquestionably China, which resells to Europe part of its LNG cargoes, purchased on long-term contracts , at stratospheric prices. Comfortable, this source of supply which makes it possible to overcome Russian constraints – and pipes – is already giving wings to Europeans. Evidenced by the infrastructure projects that the EU is in the process of acquiring. And this, despite the risk of getting bogged down in a costly climate strategy.

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