Europe has been very fortunate to have had a mild winter, according to panelists at a CERAWeek by S&P Global energy conference session on Wednesday. The panelists were alluding to the continuing natural gas problem that began even before Russia invaded Ukraine. As Snam CEO Marco Alvera said at a session titled “The Future of Gas,” the company has been experiencing a gas crisis that began two years ago and has been covered by Covid as a result of supply and demand interruptions caused by the epidemic.
Growing global demand
Alvera said that the rising demand for natural gas is a good example of this. He went on to say that Europe and Asia are in a competition for winter LNG, which is only available during certain seasons. High natural gas costs in Europe began to rise late last year, and blackouts in northern Europe were only averted as a result of the mild winter, according to Alvera Energy.
The need for U.S. LNG
As a result of Europe’s decision not to buy natural gas from Russia, the world’s biggest supplier of natural gas, the demand for LNG from the United States is expected to grow even further. According to Freeport LNG Founder and CEO Michael Smith, this might result in a new dynamic in which both continents may be unable to find an alternative. Freeport LNG was previously sending around 65 percent of its product to Asia and 30 percent to Europe, but in the last few months, the company has converted to exporting approximately 70 percent of its product to Europe, according to Smith. He said that this transfer was feasible because there are no destination limits for U.S. LNG and that it is a flexible product.
“The question is, how much more can we do?” says the author. According to Smith, the construction of these facilities may take years and years. He also said that one new train is being commissioned at the Calcasieu Pass Facility by Venture Global LNG. “That’s all there is to it. “There is no extra LNG coming online to fill the gap in supply for the gas that will be required by Europe in the future year.”
However, according to Cynthia Hansen, Executive Vice President and President, Gas Transmission and Midstream for Enbridge, the United States’ LNG export capacity should be able to increase over the next decade. Enbridge already supplies three of the four existing LNG plants in the United States, and the company expects to provide four more, according to her.
No short-term solution
The market seems to be “awful,” according to Charif Souki, Tellurian Executive Chairman of the Board, who spoke during a separate leadership dialogue session. He said that there is no short-term answer. He claims that a global energy crisis caused by underinvestment became apparent approximately a year ago. In Souki’s opinion, “the greatest moment to invest was around five years ago.” “Today is the next best moment,” says the author.
In addition to underinvestment, some governments began to depend on technology that had not yet been established and to engage in unrealistic solutions, according to Mr. Kothari. The combination of these factors, as well as rising demand, a military crisis, and an oncoming economic catastrophe, has brought the energy market to a point where it must be corrected before the attention can be shifted to climate change, according to Souki.
Alvera believes that expanding the use of hydrogen and renewable energy will be a part of the answer in Europe, and he believes that boosting Europe’s natural gas storage capacity might result in the continent being nearly entirely self-sufficient during the winter. In the meanwhile, Souki believes that Europe will return to coal, but that they should request as much LNG from the United States as feasible. “They need our assistance, and this is the appropriate moment to provide it,” he said.
Natural gas is critical to the energy transition, according to Hansen, and it is a resource that we must take use of.
According to her, “natural gas is well positioned to guarantee that we have the energy we need in terms of equity security,” she said. “As well as to encourage fewer carbon emissions, both here in the United States, in North America, and across the globe.”