U.S. LNG Gas Demand Hits New Record as Europe Looks for New Sources
Demand for natural gas and production from the U.S. hit a new high at the end of 2024 according to a report from Reuters. It comes as Europe further looks to replace Russian supplies and the U.S. industry is expanding its exports to new customers including Ukraine.
Citing data from financial firm LSEG, Reuters reports U.S. production topped 15 billion cubic feed three times in the last two weeks and set a new record of 15.2 bcf on December 31. Reuters says it is a sign of a strong year ahead as U.S. producers bring additional capacity and export terminals online.
The U.S. continues to be the largest exporter of LNG becoming a major supplier to both Europe and Asia. Going into the winter season in the northern hemisphere, the U.S. Energy Information Administration forecasted at the end of November its expectation that the market would remain relatively stable with a supply-demand balance if the weather remains mild as it has in the past two winters.
Threatening the balance in the market, however, is the end of Russia’s transmission agreement which has seen its gas flowing through Ukraine to the West. Ukraine refused to renew the five-year agreement and Russia’s Gazprom was due to stop the flow today, January 1. While Europe has large stockpiles, it is expected it will turn to the U.S. for increased shipments depending on the weather conditions this winter.
U.S. export operations have been gearing up over the past few weeks. Venture Global reported in the middle of December that the first phase of its second facility, Plaquemines LNG, in Port Sulphur, Louisiana, had achieved its first production becoming the U.S.’s eighth LNG export facility. When completed the facility will become one of the industry’s largest with a production capacity of 20 MTPA.
Plaquemines LNG loaded its first cargo last week aboard one of the company’s dedicated LNG carriers, the Venture Bayou, a new 174,000 cbm LNG carrier built in South Korea by Samsung Heavy Industries. The vessel which is the first one nine for the company’s fleet is currently bound for Germany.
At the end of last week, Gaslog Savannah (155,000 cbm) arrived from the United States at Greece’s Revithoussa LNG terminal. The consignment of approximately 100 million cubic meters of LNG was purchased by DTEK, Ukraine’s largest private energy company. It was its first purchase from the U.S.
Because of war-related restrictions on the transit of LNG in the Black Sea, the company is having to use a convoluted method to obtain the gas. It is being re-gasified in Greece and fed into the European network, exchanged through the European Union to reach Ukraine’s gas network. DTEK says it expects to receive additional U.S. shipments and will look to expand its LNG activities into northern Europe and the Baltics.
Freeport LNG highlighted yesterday, December 31, that it had completed its 800th shipment of natural gas. The shipment was loaded for Japan’s JERA which has a large supply agreement and is an investor in the plant. It is the latest sign of recovery for Freeport LNG which was knocked offline in 2022 by an explosion and did not get permission to resume full operations till March 2023. Freeport LNG is moving forward with its plans to add a fourth train to the facility.
Other U.S. companies are also moving forward with their expansion projects. In addition to Venture Global, Cheniere Energy announced on December 30 the first LNG from its Corpus Christi Stage 3 Liquefaction Project. A joint venture between Exxon Mobile and QatarEnergy is also moving forward on the Gulf Coast and is projected to start production possibly in late 2025 or early 2026.
Despite the expansion underway in Qatar, the U.S. EIA forecasts continued steady growth for the U.S. industry. It projected capacity will surpass 20 bcfd by 2026 and 24 bcfd by 2028.
.jpg)
What Next for US LNG After Ukraine Gas
Transit Halts?
Exports of Russian gas via pipelines running through Ukraine finally came to an end on New Year's Day.
Ukraine will lose up to $1 billion a year in transit fees from Russia - Gazprom will lose close to $5 billion in gas sales.
The United States is likely to emerge as the biggest winner of the unfolding situation in Europe.
Exports of Russian gas via pipelines running through Ukraine finally came to an end on New Year's Day, marking the end of an era of Moscow's dominance over Europe's energy markets. Russia's gas firm Gazprom said it had supplying gas at 0500 GMT on Wednesday after Ukraine refused to renew a transit agreement. Ukraine will lose up to $1 billion a year in transit fees from Russia-- which it hopes to offset by quadrupling its domestic gas transmission tariffs for consumers--while Gazprom will lose close to $5 billion in gas sales. Ukraine gas amounted to 5% of total EU gas imports.
However, unlike the situation in 2022, natural gas prices have not been majorly impacted by the cut-off thanks to Europe’s success at finding alternative supplies. Energy experts had earlier warned that Austria, Hungary and Slovakia are likely to be the hardest hit when the imports are cut off. Thankfully, Slovakia has already secured alternative supplies: Azerbaijan’s state oil company, SOCAR, has started supplying natural gas to Slovakia’s Slovenský plynárenský priemysel (SPP), the country’s largest state-owned energy operator. This comes just a month after SPP signed a short-term pilot contract to buy natural gas from Azerbaijan as it prepared for a possible halt to Russian supplies via Ukraine. SPP has pledged to supply its customers mainly via pipelines from Germany and also Hungary, albeit at additional transit costs.
Related: 89% of New Cars Sold in Norway Last Year Were EVs
European natural gas futures climbed to €51 per megawatt-hour, the highest since October 2023, before easing to €50 as the Russia-Ukraine deal came to an end. However, the gas rally could gain momentum in the weeks to come: with inventories currently depleting at the fastest pace since 2021, sub-zero temperatures in parts of Europe could drive up heating demand. On the other hand, U.S. natural gas futures dropped 5.7% to $3.71/MMBtu following a surge to a two-year high as traders took profits. However, U.S. gas prices still booked their largest annual gain since 2016, driven by rising exports to meet overseas LNG demand and expectations of higher consumption during winter.
U.S. LNG Demand Could Surge
The United States is likely to emerge as the biggest winner of the unfolding situation in Europe–if recent developments are any indication. Norway and the U.S. have replaced Russia as Europe’s biggest gas supplier: last year, Norway supplied 87.8 bcm (billion cubic meters) of gas to Europe, good for 30.3% of total imports while the U.S. supplied 56.2 bcm, accounting for 19.4% of total. However, the U.S. is the biggest LNG supplier to Europe: last year, the U.S. accounted for nearly half of total LNG imports by the continent, marking the third consecutive year in which the United States supplied more LNG to Europe than any other country.
What’s interesting here is how fast this has happened: the U.S. supplied 27%, or 2.4 billion cubic feet per day (Bcf/d), of total European LNG imports in 2021; 44% (6.5 Bcf/d) in 2022; and 48% (7.1 Bcf/d) in 2023. Obviously, Russia’s war in Ukraine has played a big part in growing Europe’s appetite for U.S. gas. Meanwhile, Europe’s capacity to accept LNG is increasing. Europe’s LNG import, or regasification, capacity is on track to expand to 29.3 Bcf/d in 2024, a 33% increase compared with 2021. Currently, Germany is adding the most LNG regasification capacity in Europe, with developers in the country having added 1.8 Bcf/d in 2023 and on track to add another 1.6 Bcf/d in 2024.
On a global scale, the United States shipped a record 56.9 million metric tons of LNG during the first eight months of 2024, surpassing 54.3 million tons from Australia and 53.7 million tons from Qatar during that period. That marks the second straight year that U.S. exporters have topped global export rankings.
Interestingly, Europe has bought considerably less LNG from the U.S. in the current year, with shipments from January through August dropping by 22% Y/Y. The slowdown has largely been triggered by a sharp climb in European power generation from renewable energy sources, which remain a priority for Europe's power utilities. Solar and wind power's share of electricity generation in Europe jumped from around 16.4% in 2022 to 20.5% so far in 2024 while fossil fuel generation's share dropped from around 44.6% in 2022 to 36.6% so far this year. As you might expect, coal-fired power has taken the biggest hit in Europe’s energy mix, although natural gas generation's share has also declined, from around 26% in 2022 to 22% so far this year. But with Europe now receiving even less Russian gas, we expect U.S. LNG exports to the region to surge again.
The long-term U.S. natural gas outlook is equally bright. According to Morgan Stanley, the U.S. natural gas market is poised to enter a new cycle of demand growth thanks to surging LNG exports and rising electricity demand. Over the past few years, dozens of pundits and industry experts have predicted that the ongoing Fourth Industrial Revolution will drive unprecedented electricity demand growth in the United States and globally. Last year, the power sector consulting firm Grid Strategies published a report titled “The Era of Flat Power Demand is Over,” which pointed out that United States grid planners—utilities and regional transmission operators (RTOs)—had nearly doubled growth projections in their five-year demand forecasts. For the first time in decades, demand for electricity in the U.S. is projected to grow by as much as 15% over the next decade driven by the Artificial Intelligence (AI), clean energy manufacturing and cryptocurrency boom.
By Alex Kimani for Oilprice.com
Another year, another hiccup at Hammerfest LNG. Equinor’s crown jewel in Arctic Norway is down again, this time thanks to a compressor failure, according to a regulatory statement from Gassco. Output has screeched to a halt until Jan. 9, leaving Europe’s largest LNG export plant offline for a week—because, apparently, the Arctic air isn’t the only thing freezing up.
Hammerfest LNG, or Melkoeya if you prefer its less industrial moniker, packs a punch, delivering enough gas to heat 6.5 million European homes. That’s a hefty 5% of Norway’s gas exports, which is no small potatoes given Norway’s top-dog status in Europe’s gas game post-Russia’s Gazprom tantrum in 2022.
This outage joins a growing list of Hammerfest’s “incidents.” From a gas leak last April to a fire that sidelined operations for 18 months starting in 2020, reliability hasn’t exactly been the plant’s calling card.
Still, Equinor and its co-owners—TotalEnergies, Vaar Energi, Petoro, and Harbour Energy—press on, with the Snoehvit field feeding the beast.
The Hammerfest LNG plant at Melkoeya draws gas from the Snoehvit field in the Barents Sea, and has the capacity to deliver about 6.5 billion cubic meters of gas per year, enough to supply about 6.5 million European homes. Exports from Hammerfest represent about 5% of all Norwegian natural gas exports.
In late September, Norway restarted its Kaarstoe processing plant after it was down three weeks for “complex and extensive maintenance”.
Norway is the single biggest provider of natural gas to Europe after Russia’s Gazprom cut off most of its supply to the EU after the Russian invasion of Ukraine in early 2022.
The Hammerfest LNG shutdown comes as winter heating season is in full swing.
By Julianne Geiger for Oilprice.com
Ukraine will quadruple its domestic gas transmission tariffs for consumers from Jan. 1.
Previously, Russia said it’s willing to continue supplying gas to Europe via Ukraine.
The EU has warned member countries to prepare for a world without Russian gas.
Ukraine will quadruple its domestic gas transmission tariffs for consumers from Jan. 1 as it tries to offset the impact of lost revenue after its gas transit deal with Russia came to an end on Monday. The Ukrainian regulator has approved a decision to increase domestic gas transmission tariffs to about 502 hryvnias ($11.95) for 1,000 cubic meters, up from 124 hryvnias ($2.95) previously.
"In 2024, 85% of our revenue came from transporting gas originating in the Russian Federation. It means that only 15% remains for us from domestic customers," Dmytro Lyppa, general director of Ukraine's gas transport operator, said during the meeting to discuss the tariff increase. Ukraine still earns ~$1 billion in transit fees per year from Russian transit.
Previously, Russia said it’s willing to continue supplying gas to Europe via Ukraine if Kyiv and the involved European countries can come to an agreement.
"Of course, in my opinion, the European countries that currently receive gas through this corridor are interested in continuing such cooperation," Russian Deputy Prime Minister Alexander Novak, who is in charge of Russia's energy policy, told reporters "We are ready to supply (gas), but not much depends on us, so probably this should be negotiated directly between the users and the country through which the transit is provided."
The EU has warned member countries to prepare for a world without Russian gas, with Ukraine gas amounting to 5% of total EU gas imports. Aura Sabadus, a senior analyst at the ICIS market intelligence firm, told Politico that Austria, Hungary and Slovakia are likely to be the hardest hit when the imports are cut off. Thankfully, Slovakia has already secured alternative supplies: Azerbaijan’s state oil company, SOCAR, has started supplying natural gas to Slovakia’s Slovenský plynárenský priemysel (SPP), the country’s largest state-owned energy operator. This comes just a month after SPP signed a short-term pilot contract to buy natural gas from Azerbaijan as it prepared for a possible halt to Russian supplies via Ukraine.
By Alex Kimani for Oilprice.com
The LNG carrier Pioneer, carrying sanctioned Russian LNG, was unable to find a buyer after a four-month global search.
The ship was forced to return to the Koryak floating storage unit in Kamchatka, where the gas will likely be held until a buyer can be found.
The incident highlights the increasing challenges faced by Russia in exporting its energy resources due to Western sanctions and compliance concerns.
The shadow fleet of liquefied natural gas carriers transporting blacklisted Russian LNG has encountered a major setback, with at least one ship's cargo traveling around the world, finding no buyers as the cargo was deemed too risky.
Bloomberg reports that an LNG carrier called "Pioneer," carrying a sanctioned shipment of Russian LNG, circumnavigated the world for four months, failing to find a buyer willing to breach US restrictions.
"This vessel (called Pioneer) was spotted on satellite images picking up the first shipment from the Arctic LNG 2 facility in early August — despite camouflaging the move with misleading location information — but then spent well over four months hunting for a customer," Bloomberg's Stephen Stapczynski wrote on X.
According to ship-tracking data, Pioneer arrived at the Koryak floating storage unit in Kamchatka on Thursday after four months on the seas.
"The gas is likely to be held there until a customer can be found," Bloomberg noted.
Most of Russia's dark fleet consists of oil tankers. However, the West has increasingly targeted LNG carriers as Washington and Brussels race to sever Russian energy flows to Europe.
Regarding global LNG trading - buyers, sellers, charterers, financing banks, and insurers must be extra vigilant when running compliance checks to ensure their ships do not engage in Western-sanctioned activities, and this is likely why Pioneer could not find a buyer.
By Zerohedge.com
No comments:
Post a Comment