The United States became the largest gas exporter in the world
Russian oil and gas embargo
Since the beginning of Russia’s military attack on Ukraine, the ministers of EU member states have discussed the comprehensive embargo on Russian oil and gas for six rounds, but still the embargo on Russian oil and gas aimed at preventing the financing of Vladimir Putin’s war machine has achieved consensus among 27 The country is not a member of the European Union.
As Josep Burrell, the EU foreign policy official, has announced that EU member states have paid 35 billion euros to Russia for the import of various energy carriers since the beginning of the war in Ukraine. According to official statistics, in 2021, these countries depended on Russia to supply 40% of their gas and 25% of their oil, among which Germany, Italy, Austria and Hungary depend on Russian gas more than 23 other countries. Of course, an agreement has been reached to stop importing coal from Russia to the European Union and its implementation will begin next August, but its value is not comparable to oil and gas.
Of course, at the same time as Volodymyr Zelensky, the president of Ukraine, asked the European Union to lift the embargo on Russian oil and set a deadline for ending gas imports from this country, seventeen members of the European Union proposed the European Commission to provide technical assistance in order to gradually eliminate their reliance on Russia’s fossil fuels have responded positively; However, there is still serious opposition to the Russian oil and gas embargo.
The United States is the largest gas exporter in the world
With the continuation of the war in Ukraine and the problems of receiving gas from Russia, the European Union thought of meeting its energy needs through the import of liquid gas, but the United States, which already had its facilities ready, has now become the largest exporter of gas in the world.
European authorities know that winter will come sooner than they think, and they should start thinking about their energy supply now, because Russia has reduced gas transmission from various pipelines to Europe in the last few months. The countries of the green continent now consider liquefied natural gas (LNG) as the best available alternative.
About two weeks ago, Gazprom stopped the transmission of gas to Europe from the Nord Stream 1 pipeline for 10 days under the pretext of planned periodic repairs. A few days after the launch of the pipeline, Moscow announced that the failure of one of the compressor turbines that Siemens had to repair caused the gas pressure in the pipeline to reach a maximum of 20%, and there is a high possibility of halting exports.
Analysts emphasize that fluctuations in the flow of Russian gas to Europe do not have technical reasons and Moscow is exaggerating the problems. The main reason is political, and the Kremlin wants to prevent gas storage tanks in different parts of Europe, which are mostly underground, from filling up by reducing the flow of gas pressure. So far, this trick of Moscow has worked and it is said that in the current situation, these tanks do not have as much gas as in previous years, and European countries will not be able to fill them.
These fears have caused the European Commission to notify the EU member states of the proposal of gas rationing and saving 15% of consumption until next winter.
According to analysts, the Kremlin wants to prevent the filling of gas storage tanks in different parts of Europe, which are mainly underground, by reducing the flow of gas pressure.
The staggering increase in gas prices
European countries anticipated such a situation with the continuation of the war in Ukraine, that’s why they tried to find alternative sources. The construction of new pipelines was time-consuming and unfeasible, so they saw the main option to buy liquefied natural gas (LNG). Since the liquefaction of natural gas reduces its volume by 600 times and can be transported by ship from faraway places, this commodity was a favorable option for the short term. However, the limitations in the world’s liquefied gas production facilities and capacity, and even the lack of ships for transfer and the lack of gas receiving stations in Europe were among the problems.
On the other hand, the influx of European companies and governments into the world’s liquefied gas market causes a sharp increase in gas prices because oil did not change but went up sharply.
European gas prices have quadrupled this year compared to the beginning of 2022. According to “Rasha Today”, at the beginning of the year, before the start of the war in Ukraine, the price of natural gas was about 640 dollars per thousand cubic meters or 60 dollars per megawatt hour. In early March, however, gas prices set a historic record and reached $3,900, but then fell.
A few days ago, TTF gas deals in the Netherlands briefly crossed $2,500 per thousand cubic meters, or €235 ($239) per MWh.
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Europe and the energy crisis in winter
Before the start of the war in Ukraine, Russia supplied 40% of the EU’s gas needs. From March 2022, Europe decided to increase gas imports from Russia to about 10% within a year. Since the establishment of sanctions against Moscow, European governments, including Germany, have tried to supply gas from other sources and have approached Norway and the Netherlands on the one hand, and Qatar and the United States on the other hand.
In this regard, Europe is trying to invest in LNG infrastructure to deal with the energy crisis as winter approaches. According to the analytical news site “Euroactive”, the flow of gas from Russia has been steadily decreasing over the past months and has decreased to 31% of EU imports in April this year, which is lower than 45% in the same period last year. For this reason, the European Union plans to fill its gas reserves by 80% by next November. Many countries are now counting on increased LNG imports from the United States and Qatar to fill these stocks.
But increasing imports will also require investment in new LNG infrastructure as Europe moves to decarbonize and reduce its reliance on fossil fuels.
“Alex Barnes” at the Oxford Institute for Energy Studies believes: the huge cost of this investment is negligible compared to the damages of gas shortage in winter. Others, however, say that the gas crisis should be considered as a turning point in the way infrastructure costs are calculated.
Tomas Proza, the special envoy of the Czech Ministry of Commerce and Industry, believes that the infrastructure that created security but had no commercial value was not built until now. Now we must transform and invest in security.
The same view has been echoed in Germany. Over the past months, the German government has spent billions of dollars to buy floating LNG terminals ahead of winter and passed emergency legislation to speed up the creation of new gas import infrastructure. According to the forecast of the Federal Grid Agency, without LNG imports, Germany will definitely face a gas shortage next winter.
The European Union plans to fill its gas reserves by 80% by November, so it is counting on increasing LNG imports from the United States and Qatar to fill these reserves.
The world liquid gas market
In a market where the United States, Qatar and Australia are known as the top suppliers of LNG, two important things have happened: America has become the most important exporter of liquefied gas, and Europe has overtaken Asia as the most important destination for shipments of this commodity.
The first half of 2022 saw the United States become the world’s largest exporter of liquefied natural gas (LNG). This development was confirmed this week by the US Energy Information Administration (EIA) citing CEDIGAZ LNG market data.
Total U.S. LNG production flows averaged 11.2 billion cubic feet per day during the period, a 12 percent increase over the past six months compared to 2021, according to the EIA. The EIA cited three key factors behind this: new LNG capacity, high gas prices abroad and increased global demand.
Europe has become a major source of gas for the United States, as many countries on the continent are looking for a long-term alternative to Russian gas supplies.
The EIA report states that the United States has increased its nominal capacity since late 2021. This increase, particularly at new and existing facilities in Texas and Louisiana, increased US LNG capacity to an average of 11.4 Bcf/D (billion cubic feet per day) and increased near-term peak capacity even further. It reached 13.9 Bcf/D.
This puts the United States ahead of Australia and Qatar, which EIA estimates have maximum LNG production capacity of 11.4 and 10.4 Bcf/D, respectively. The eighth U.S. LNG facility, scheduled to come online in 2024, will increase U.S. peak daily production capacity to 16.3 Bcf/D.
During the first five months of this year, 71% of US LNG exports, or 8.2 Bcf/D, were shipped to UK and EU ports, the EIA noted. This figure represents half of the total demand of the United Kingdom and the European Union.
Britain and the European Union increased gas imports by 63 percent this year as they seek to replace Russia’s 14 percent share if sanctions increase and imports from Nord Stream fall. After the above two countries, England and the European Union have supplied 15% of their gas imports from Qatar and 17% from Africa since the beginning of the year.
The United States increased its nominal capacity in liquefied gas production from the end of 2021 and was able to become the most important exporter of this commodity in the world market by using Europe’s needs.
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