Monday, February 26, 2024

Differences between the US and Europe regarding LNG supply and demand

The White House announced a few days ago a temporary stop pending approval for plants to export liquefied natural gas (LNG). This situation once again puts the European energy market on alert, which has suffered a series of crises in recent years, even due to geopolitical reasons, unexpected changes in climate or even labor disputes.

Recapitulating a little about what has happened in the European energy sector in the last two years, we can notice a trend of using efficient mechanisms to reduce gas consumption on a continuous basis. If we continue on the same path, It is hoped that this stoppage will not affect the continent’s energy security.

As a result of Russia’s massive invasion of Ukraine in February 2022, the energy situation in Europe has changed dramatically. Europe understands the need to reduce dependence on fossil fuels and, at the same time, to increase the use of safe and diverse sources. In May 2022, the European Commission launched its REPowerEU Plan to help the bloc save energy, boost the deployment of renewable energy and diversify its energy supply.

After the launch of REPowerEU, the energy supply mix has changed from 2021 to 2022. Gas imports made by the EU through the gas pipeline from Russia have decreased from 41% to 9% and, in turn, LNG imports increased by 19% to 41%, according to data from Kpler and Eurostat.

Gas demand in Europe in the last two years has decreased significantly, mainly due to REPowerEU policies, energy efficiency programs, increasing renewable energy generation, demand management and demand disruption. If the success of these policies and programs continues, the gas demand in Europe in 2030 is expected to be less than 400 trillion cubic meters (bcm).

In addition to reducing gas demand, Europe has made a significant effort to diversify the sources of LNG imports.

While Europe is focusing on ways to reduce gas demand and, consequently, LNG demand, the United States is increasing LNG export capacity.

LNG imports increased, but in 2023 they were below previous expectations. According to Kpler, Europe will import about 105 bcm of LNG in 2021, 167 bcm in 2022 and 167 bcm in 2023. The main sources of LNG imports in Europe are the United States, Qatar, Russia, Algeria and Nigeria. . In recent years, the United States has been the main supplier of LNG to Europe, accounting for 28% of imports in 2021, 43% in 2022 and 46% in 2023.

The amount of US LNG imported to Europe in 2023 increased by 7% compared to 2022. Assuming the same increase in the coming years, the United States will be ready to supply 123 bcm of LNG to Europe in 2030, with others coming from different countries to fulfill the concept of diversification of supply.

While Europe is focusing on ways to reduce gas demand and, consequently, LNG demand, the United States is increasing LNG export capacity and planning new terminals, according to S&P. Considering only the LNG terminals currently under construction, by 2030 US export capacity will reach 170 million tons per year (mtpa), or the equivalent of 238 bcm. This figure is 76% higher than the expected LNG demand in Europe of 98 mtpa (about 135 bcm) in 2030.

And if all the proposed US LNG terminals are built by 2030 the country’s LNG export capacity will be approximately 337 mtpa (about 465 bcm), more than the entire estimated gas demand of Europe of 284 mtpa. mtpa (about 392 bcm).

one more time, Europe’s energy security is used to justify the construction of LNG export and import terminals. Most of the projects are considered emergency measures to provide gas to a Europe facing an energy crisis as Russian gas supplies dwindle.

However, thanks to Europe’s rapid response, the crisis has so far been under control, but the continent cannot rest on its laurels and must continue its efforts to reduce gas consumption, diversify its import sources of gas and increase The renewable energies. Now is the time to re-examine the proposed LNG projects to reduce the risk of over-investment.

World Nation News Desk
World Nation News Desk
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