Energy crisis highlights the vital role of LNG

The energy crisis has thrown new light on the importance of energy security, and in particular the vital role of liquefied natural gas (LNG) in securing reliable and affordable energy supply in this unsettling new geopolitical era.

LNG is in greater demand today than ever, and its versatility has proved to be particularly valuable amid the recent turmoil in global energy markets.

When Europe found itself short of energy after the interruption of pipeline gas supplies from Russia, many nations turned to LNG as an alternative.

Last year saw record imports of LNG into Europe, rising by 65 percent year-on-year. Producers from Argentina to Australia are expanding capacity in response to the market shifts, keeping LNG in the headlines as a resilient fuel to turn to in uncertain times.

The European Commission’s plan to boost its energy resilience, REPowerEU, rests on diversifying gas supplies while continuing to boost renewables and improve energy efficiency.

European nations quickly realized that LNG offered the best alternative to Russian pipeline gas and within the space of a few months, Germany built and commissioned three new regasification plants on the North Sea coast, while the Netherlands built one.

The US is expected to play a major role in providing for the EU’s natural gas needs. Last year, US President Joe Biden approved additional exports of LNG to the EU, allowing Cheniere Energy’s Louisiana and Texas terminals to export 20 million cubic meters of LNG per day to any country with which the US does not have a free trade agreement. In the first half of 2022, the US became the world’s largest LNG exporter as it increased sales to Europe.

Europe is also looking to Norway, Qatar, Azerbaijan, Egypt, Turkey and Israel for LNG imports, and recently signed a memorandum of understanding with Egypt and Israel to facilitate delivery of LNG to the EU. Recent large discoveries of gas offshore in the Eastern Mediterranean and West Africa may find a natural home in Europe.

Europe’s scramble for LNG left some Asian countries priced out of the market and this has taught us an important lesson about energy security.

Naturally every nation sees energy security primarily through the lens of national self-interest, particularly at times of geopolitical tension. But shared energy security means governments must invest not only in import facilities, but also new upstream supply projects to maintain market stability.

Energy market crises serve to remind us that energy security cannot be a zero-sum game where the winner takes all at the expense of others. True global energy security can never be achieved if countries do not make investments for the long term and support heathy and well-functioning international markets.

True energy security can only be secured by fostering global cooperation, long term trusted partnerships between producers and consumers, and investments in new production and technologies for the long term.

When investments and partnerships are made for the long term, every nation benefits from the stability provided by a well-supplied market.

Well supplied global energy markets are a precondition for economic stability, which enables countries to plan for the future, invest in clean technologies and maintain public support for the transition.

LNG was a relative latecomer to the energy market, compared with other fossil fuels. Its extraction and transportation are no small undertakings, requiring considerable time and investment.

LNG is expected to play a key role in the energy transition, supporting stable and secure electricity and industrial output, and complementing the growth of intermittent renewables such as solar and wind.

In a year when everything – and particularly the energy market – appears so volatile, governments are turning to LNG in pursuit of stability.

LNG continues to prove its value as a versatile energy source at times of disruption, and we encourage consuming governments to explore partnerships for investment in new supplies that will foster shared security for years to come.

Gastech is at the heart of natural gas, LNG, hydrogen, low-carbon solutions, and climate technologies

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