As winter approaches, a global war for LNG begins

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

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This massive gas flow chaos illustrates a fact: a global war for LNG has begun. “After the tragedy [nucléaire] from Fukushima [en 2011]LNG has made it possible to reduce the shock”, said Thierry Bros, professor at Sciences Po, energy expert. Europe then sends this liquefied gas to Japan and uses the gas in Russia. he remembered. Now, a twist in history: “If Europe quickly fills its gas stocks, thanks to LNG it deviates 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. »

australian

Malaysia

Russia

Qatar

Nigeria

trinity
and Tobago

United States

Japan

Korea
from the South

China

India

Taiwan

France

UK

Spain

Algeria

Senegal

United States

China

Europe

Algeria

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Russia

Africa

traditional gas

Regional 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 diversifying suppliers

LNG terminal

liquefaction (export)

Liquefied natural gas (LNG)

An alternative to diversifying suppliers

LNG terminal

regasification (import)

Liquefied natural gas (LNG)

An alternative to diversifying suppliers

Main sea routes LNG

Liquefied natural gas (LNG)

An alternative to diversifying 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 main producer of hydrocarbons, ahead of Saudi Arabia and Russia. In 2016, the first gas liquefaction plant opened the way for exports, and terminals have since multiplied in the Gulf of Mexico.

China’s opportunistic game

China is the largest importer of LNG in the world. In the first half of 2022, Beijing sold 4 million tons of American or African LNG to European states. Many LNG carriers are returning to the EU. However, as winter approaches, Beijing may maintain its orders and increase competition in the gas market.

The chance for Europe* to get out of Russia’s trap

LNG imports increased by 60% in the first half of 2022, surpassing Russian gas. But Eastern Europe, which is very dependent on Russia, has little or no access to the sea. Germany has a coast, 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 and United Kingdom

A good deal for Algeria

First African exporter of gas, Algeria delivers to Europe through a gas pipeline. But since the diplomatic crisis in Rabat at the end of 2021, Algiers has cut the pipeline that goes through Morocco. The development of liquefied gas will make Algeria, the EU’s fourth LNG supplier, less dependent on its neighbor.

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 which European players have long refused to perform.

Russia’s energy blackmail

The main source of gas for Europe, Russia has limited its supplies since Western sanctions linked to the invasion of Ukraine. This energy blackmail has pushed Europeans to look for other partners and turn to LNG.

The new attraction in Africa

The potential of African gas is of interest to Europeans, who are fighting insecurity (piracy in the Niger delta, jihadist attacks in Mozambique and the Sahel) and competition: gas deliveries from new offshore fields in Senegal (2.5 million tons of LNG per year by the end of 2023) is largely preempted 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 strengths

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

Could this be a longer term scenario? As winter approaches, Asian countries 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, which is very far-sighted, has fulfilled this more than average in the last five years. But what about China?

More CO2

“This is the great unknown, emphasized by 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 cannot be excluded, if prices are in its favor, that Beijing decides to continue operating coal-fired power stations while supplying gas from Central Asia and Russia, as it did last month”, this specialist continues.

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Because, if the United States exports more of its gas, mainly from shale, the real winner of this crisis remains undoubtedly China, which sells to Europe part of its LNG shipments, bought in long-term contracts, at stratospheric prices. Conveniently, this source of supply that made it possible to overcome Russian restrictions – and pipelines – already gives wings to Europeans. Infrastructure projects prove that the EU is in the process of acquisition. And this, despite the risk of being bogged down by an expensive climate strategy.

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