Explainer: could more LNG supplies arrive in Europe in the event of a crisis?

Jan 25 (Reuters) – The United States, the world’s largest producer of natural gas, is in talks with major energy producing countries and companies over a possible diversion of liquefied natural gas (LNG) to Europe if Russia is invading Ukraine, according to senior Biden administration officials. said Tuesday. Read more

Gas prices in Europe and Asia were already much higher than in the United States due to tight supply and strong demand, before recent conflict fears hit the flow from Russia, world’s second largest gas producer and main supplier to Europe.

However, getting additional LNG cargoes to Europe quickly will not be easy, as global suppliers are already producing as much gas as they can that is supercooled in liquid form for transport.

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Such an effort should involve rerouting ships already on the water or ready to depart.

WHO BUYS LNG?

LNG is sold around the world to companies operating in countries that generally seek to diversify their energy sources away from coal. China, Japan and South Korea were the three largest importers of US LNG in 2020, according to figures from the US Energy Information Administration (EIA).

Global LNG exports are expected to reach approximately 53.3 billion cubic feet per day (bcfd) in 2022. This still represents a fraction of overall global natural gas consumption of approximately 400 bcfd, most of which is delivered by pipelines .

If prices jump in one part of the world, like what happened in Europe in December, LNG buyers can easily send ad hoc cargoes to the region and, in some cases, can hijack long-term deals, both contracts with their customers permit. such diversion.

WHY CAN’T THE US AND OTHER EXPORTERS SEND MORE GAS?

Exporting gas on ships is not as easy as filling a tanker with crude oil. Gas liquefaction plants, as they are called, typically take two to four years to build.

There is only one facility under construction in the United States that could add more liquefaction capacity this year – Venture Global LNG’s Calcasieu Pass in Louisiana, which analysts say could add about 0.9 bcfd of end of the year.

The three largest LNG producers in 2021 were Australia with around 10.5 billion cubic feet per day, Qatar with 10.1 billion cubic feet per day and the United States with 9.8 billion cubic feet per day. per day, representing more than half of the world’s supply. They all export at or near full capacity.

For 2022, the United States is expected to export an average of about 11.5 billion cubic feet per day, or about 12% of the country’s expected record gas production of more than 96 billion cubic feet per day, according to projections from the EIA. Read more

WHAT HAPPENED WITH THE PRICES?

Global prices are trading around seven times higher than the US gas benchmark, with European futures trading at over $30 per million British thermal units (mmBtu), compared to just $4 in the US .

Asian futures have been hovering around $26 per mmBtu lately, after peaking at an all-time high of nearly $49 per mmBtu last month.

In December, European futures hit record highs of nearly $60 per mmBtu on Russian supply, leading LNG exporters to redirect their cargoes to Europe.

The United States sent about half of its LNG exports in December to Europe, up from 37% earlier in 2021, according to data from Refinitiv and the U.S. Department of Energy. Read more

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Reporting by Scott DiSavino; additional reporting by Marcy de Luna Editing by Marguerita Choy

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