By using natural gas to put pressure on European countries, Vladimir Putin will have finally obtained the opposite effect: losing his first customers and making the gas majors of the United States specializing in deliveries of liquefied natural gas (LNG) happy. . Over the first 11 months of 2022, these jumped 137% compared to the same period of 2021, according to data from Kpler, cited by the Archyde.com agency.
In volume, LNG deliveries from the United States should exceed 55 billion m3 in 2022, which is two and a half times the level of last year, i.e. an additional 34 billion m3, well above the 15 billion m3 promised by Joe Biden, after the invasion of Ukraine by Russia, on February 24, and the imposition of sanctions on Moscow by Western countries.
And if we take into account the deliveries of American LNG to the United Kingdom and Turkey which are connected to EU countries via gas pipelines, the total volume 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, the American gas companies answering primarily to the bargain of prices multiplied by 10 on the wholesale market rather than to 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 of which Germany has also complained through the voice of its Minister of the Economy, Robert Habeck, speaking of prices “astronomical” and France, notably Emmanuel Macron, during his recent trip to the United States, because high gas prices make 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 raised in 9 months
For American LNG players, this is indeed good business. Over the first 9 months of the year, the seven main LNG companies had earned 35 billion dollars, against 8.3 billion dollars over the same period of 2001, an increase of 322%, according to the American Energy Information (EIA).
This is the price to pay to emancipate oneself from the goodwill of the Kremlin. “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 indeed not at all obvious to find an alternative to the high volume of Russian gas. The United States alone supplied more than half of LNG imports from European Union countries, even delivering the additional 15 billion m3 promised by Joe Biden in mid-August. A boom which 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 remainder was delivered 15% by Qatar, 17% by four African countries, and another 14% by Russia, according to EIA data.
However, this increase in American LNG deliveries took place with a utilization capacity of the seven LNG terminals of 87%, the same as in 2021. On the production capacity side, they had only increased by 1 .9% from November 2021, when gas prices were already trending up in the last quarter of 2021, well before the invasion of Ukraine.
A less tense situation
And it didn’t really have an impact because, due to an explosion, one of the Texas terminals of Freeport LNG, which at that time represented 20% of the gas liquefaction capacity of the United States, had to be put on hold. Three-fifths of its production was destined for Europe. Without this accident, estimates Freeport LNG, 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 could remain high due to the mild temperatures of recent weeks well above their seasonal norms. A situation which is reflected in prices which have been divided by 5 since their peak at the end of August, on the Dutch gas trading platform TTF, the European benchmark, falling to their lowest since November 2021.
It remains to be seen whether this return of prices to more usual levels will continue during 2023, which represents the real test for the reconstitution of stocks for the winter season 2023-2024. On the United States side, underlines the IEA, there will be no new LNG export capacities this year, for the first time since 2016.
Two new US infrastructure projects have been approved in 2022 but will not be operational for a few years. Exporting gas companies measure the risk represented by a surplus market on the price of gas.
The United States has the capacity to continue to maintain LNG delivery volumes to Europe this year as it did in 2022. There is no lack of it, since the country’s proven reserves (i.e. i.e. exploitable under current technological conditions and prices) increased by 32% between 2020 and 2021, says the EIA.
Drop in consumption in Europe
Especially since, at the same time, consumption in the EU fell over one 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 losing their competitiveness due to high prices, in energy-intensive production sectors, such as aluminum manufacturing.
As for this side of the Atlantic, regasification terminal projects are not legion in the short term. Only Germany – which had none due to its heavy reliance on gas pipelines from Russia – built one in record time, at Wilhelmshaven. Managed by the Uniper company, it saw the arrival of December 3 its first cargo, carrying 170,000 m3 of LNG, loaded on December 19 at Calcasieu Pass by the gas company Venture Global.
Nevertheless, the experts believe that the existing infrastructures are sufficient, the network between the EU countries making it possible to transport the necessary gas during the periods of replenishment of the stocks.
Above all, the war in Ukraine has radically changed the energy situation in the European Union and convinced Brussels to make this crisis an accelerator of the energy transition which aims in particular to do without Russian hydrocarbons. This is the meaning of the REPowerEU plan, which aims to invest more in the production of electricity from renewable energies (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 deploy ecology on an industrial scale. And after the law aimed at accelerating the deployment of renewable energies, 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
These alternatives, according to a research note from the Bruegel Institute, make it possible to reduce the demand for gas from the European Union. by 41% by 2030 according to one of the scenarios of 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.