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The global market for LNG is in a state of flux due to various geopolitical and market factors, diverging from market trends in the last decade. The recent supply disruptions due to war and regional conflicts such as in Ukraine and the Gaza region have underscored the importance of resilient value chains and flexible responses to secure supply.
Access to import terminals and liquid gas markets is becoming increasingly vital, aligning with the key objectives of regional energy strategies, notably prominent in the EU. These strategies aim to enhance resilience to disruptions and ensure a stable supply of LNG as a cleaner alternative to other fossil fuels. The growing significance of LNG in the energy mix of countries worldwide further emphasises the need for adaptable and robust LNG value chains to meet the evolving demands of the market. This article explores the evolving landscape of the LNG market and the strategies needed to ensure a secure regasification capacity in the context of increasing global demand and supply disruptions.
LNG demand
Globally, natural gas accounts for approximately 24%, or roughly 3.94 trillion m3 of total energy consumption. Consumption varies from region to region due to varying levels of infrastructure and market demand. For example, North America and Europe have mature LNG networks and natural gas accounts for approximately 25% of total energy consumption.
The European gas demand is currently estimated to be around 400 billion m3, which is assumed to stay relatively stable over the coming years. Seasonal dips in demand over the summer is currently being offset by the mandate to refill the storages for energy security in the coming winter. According to the European Commission, the overall gas import capacity from LNG regasification and natural gas pipelines in Eu-rope is covering 40% (157 billion m3) of its current demand for gas. This creates a gap between capacity and demand which will be crucial to diminish in the following years by either increasing import capacity or reducing demand. For the latter, the EU has agreed to reduce its consumption by 15% compared to the past five years average.
To enhance energy security on the continent, the European Commission created the policy initiative of Projects of Common Interest (PCI) for key cross border infrastructure projects that link the energy systems of EU countries. Based on the list of EU’s PCIs, the LNG strategy includes a list of key infrastructure projects which are essential to ensure that all EU countries can benefit from a stable supply of LNG.
LNG demand in Asia has historically been strong, making the region a key market since the beginning of the LNG industry. The three founding markets of Japan, South Korea, and Taiwan have been joined by China and India, forming the ‘Big 5’ that attract considerable attention. Emerging Asian markets show great potential for LNG demand, with countries like Malaysia, Indonesia, Thailand, Pakistan, Bangladesh, Vietnam, and the Philippines having the ability to satisfy a significant portion of their energy demands via LNG. Asia continues to demonstrate rapid growth in energy demand, driving LNG to become the preferred fuel source.
LNG supply
While gas imports and LNG imports from Norway have increased significantly, only 10% of the total European gas needs are today met with domestic production, which has been decreasing over the recent years due to production limits in the Groningen Field in the Netherlands and decline in the mature fields in the North Sea.
The US exported 91.2 million t of LNG in 2023, a record for the country, accord-ing to data compiled by Bloomberg.1 Qatar, the top LNG supplier in 2022, saw its volumes shrink for the first time since at least 2016, with a 1.9% decline dropping the nation into third spot for shipments of the super-chilled fuel. Australia ranked second, with exports that were little changed from 2022. The US’s position as the largest LNG exporter is expected to continue in the coming years, with 17 more LNG plants on track to be built in the US by 2028.
Export increase from the US is a result of the global demand and the current sizeable difference in prices between the US and the European trading hubs – making the EU a lucrative market. Higher gas prices thus give the producers incentives to increase their spot volumes to cover the excess demand in the market. Furthermore, the global liquefaction capacity is set to increase in the coming years in response to these market dynamics.
Asia’s demand for LNG has been increasing due to expanding populations, rising standards of living, and urbanisation. Countries such as Japan, Korea, China, India, Indonesia, the Philippines, Thailand, Vietnam, and Bangladesh have been driving the demand for LNG. Asia, particularly Southeast Asia, has become the main export destination for growing US LNG exports. The region’s imports of LNG have been robust, with record supply keeping spot prices muted.
Despite representing a relatively small volume of the world’s LNG trades, South American LNG imports have been increasing. Several countries including Bolivia, Brazil, Chile, Colombia, Ecuador, Paraguay, Peru, Uruguay, and Venezuela have been involved in LNG trade and have been exploring the potential for LNG utilisation.
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Read the article online at: https://www.lngindustry.com/special-reports/08072024/making-moves-with-modular-regasification-terminals/
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