thanks to Vladimir Putin, the LNG sector in the US has never been better

By using natural gas to put pressure on European countries, Vladimir Putin will have finally achieved the opposite effect: to lose his first customers and to make the big gas companies in the USA that specialize in supplies of liquefied natural gas (LNG) happy. . During the first 11 months of 2022, these increased 137% compared to the same period in 2021, according to data from Kpler, cited by the Reuters agency.

In terms of volume, LNG deliveries from the US should exceed 55 billion m3 in 2022, which is two and a half times the level of last year, i.e. another 34 billion m3, well above the 15 billion m3 promised by Joe Biden, after Russia’s invasion of Ukraine on February 24 and the imposition of sanctions against Moscow by Western countries.

And if we take into account the deliveries of US LNG to the UK and Turkey, which are connected to EU countries via gas pipelines, the total amount could reach 75 billion m3 compared to 44 billion m3 in 2021. .

If the President of the United States, Joe Biden, had reassured the Europeans after the invasion of Ukraine by promising them an additional 15 billion m3, it is finally the double that will have been delivered, since the American gas companies primarily correspond to the agreement on prices multiplied by 10 on the wholesale market rather than strictly political considerations.

All the European countries were scrambling to make sure they had their gas reserves sufficiently filled before the onset of winter! A high cost, which Germany has also complained about through the voice of its economy minister Robert Habeck, who talks about prices “astronomical” and France, especially Emmanuel Macron, during his recent trip to the United States, because high gas prices are making its industrial sector less competitive. But on the Washington side, the Europeans have been sent back to the classic law of supply and demand.

35 billion dollars collected in 9 months

For US LNG players, this is really good business. During the first 9 months of the year, the seven main LNG companies had earned $35 billion, compared to $8.3 billion in the same period in 2001, an increase of 322%, according to American Energy Information (EIA).

This is the price to pay for freeing yourself from the Kremlin’s benevolence. “The share of Russian gas, which accounted for 55% of all European gas imports at the beginning of 2022, has been reduced to almost zero.”observed at the beginning of the year Josep BorrelHigh Representative of the European Union for Foreign Affairs and Security Policy, and also Vice-President of the European Commission.

It was actually not obvious at all to find an alternative to the large amount of Russian gas. The US alone supplied more than half of the LNG imports from EU countries and even supplied the additional 15 billion m3 that Joe Biden had promised in mid-August. A boom that, in passing, enabled it to become the world’s leading exporter of LNG during the first half of the year, overtaking Australia and Qatar. The rest was supplied 15% by Qatar, 17% by four African countries and another 14% by Russia, according to EIA data.

However, this increase in US LNG deliveries occurred with a utilization capacity of the seven LNG terminals at 87%, the same as in 2021. On the production capacity side, they had only increased by 1.9% from November 2021, when gas prices already increased last quarter of 2021, long before the invasion of Ukraine.

A less tense situation

And it didn’t really have an impact because one of the Texas terminals of Freeport LNG, which at the time represented 20% of US gas liquefaction capacity, had to be shut down due to an explosion. Three-fifths of its production was 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. Not only have stocks been properly replenished, but they may remain high due to recent weeks of mild temperatures well above their seasonal norms. A situation reflected in prices that have been divided by 5 since their peak at the end of August, on the Dutch gas trading platform TTF, the European benchmark, fell to the lowest since November 2021.

It remains to be seen whether this return of prices to more usual levels will continue during 2023, representing the real test of stock replenishment for the 2023-2024 winter season. On the US side, the IEA stresses, there will be no new LNG export capacity this year, for the first time since 2016.

Two new US infrastructure projects have been approved for 2022, but won’t be operational for a few years. Exporting gas companies measure the risk of a surplus market on the gas price.

The US has the capacity to continue to maintain LNG delivery volumes to Europe this year, as it did in 2022. There is no shortage of it, as the country’s proven reserves (ie exploitable under current technological conditions and prices) increased by 32% between 2020 and 2021, says the EIA.

Decline in consumption in Europe

Especially since consumption in the EU at the same time fell over a year by 25% in October and 23% in November, a study by the Bruegel Institute. This is the result of the destruction of demand created by the closure of factories that lose their competitiveness due to high prices, in energy-intensive production sectors, such as aluminum production.

On this side of the Atlantic, regasification terminal projects are not legion in the near term. Only Germany – which had none due to its heavy dependence on gas pipelines from Russia – built one in record time at Wilhelmshaven. It was managed by the Uniper company and saw the arrival on December 3rd its first cargo, with 170,000 m3 of LNG, was loaded on December 19 at Calcasieu Pass by gas company Venture Global.

Nevertheless, the experts believe that the existing infrastructure is sufficient, the network between the EU countries makes it possible to transport the necessary gas during periods of replenishment of the stocks.

Above all, the war in Ukraine has radically changed the energy situation in the EU and convinced Brussels to turn this crisis into an accelerator for the energy transition, which aims in particular to dispense with Russian hydrocarbons. This is the intention of the REPowerEU plan, which aims to invest more in the production of electricity from renewable energy (solar and wind), nuclear or even hydrogen than in infrastructures dedicated to hydrocarbons.

“With our France 2030 plan, we will continue to invest, innovate and implement ecology on an industrial scale. And after the law aimed at accelerating the spread of renewable energy, the nuclear law will mark the launch of the construction of new power plants on our territory.”also recalled Emmanuel Macron, during his wishes to the nation on December 31.

Focus on alternatives

According to a research note from the Bruegel Institute, these alternatives make it possible to reduce the demand for gas from the EU. with 41% in 2030 according to one of the scenarios in the REPowerEU plan leading to gas overcapacity in Europe. In such a case, the Ukrainian conflict will have resulted in the old continent freeing itself from Russian gas, and in a few years… from American LNG.