Summer is officially in full swing in the Northern Hemisphere, and temperatures are soaring to record-breaking highs of more than 40°C here in the UK.1 With this hot weather, it is hard to deny that the globe is warming up. Many countries are already feeling the effects of climate change, with wildfires currently breaking out across Europe due to the extreme heat. Climate change has never been so evident, and the LNG industry is ready to play its part in helping countries to curb their emissions, as moves are made to transition to low-carbon and renewable energies.
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Changes to the world’s weather patterns are not the only thing shaking up the energy sector, with recent reports that Russia has cut gas flow through Nord Stream 1 to only 20% capacity.2 Europe is sure to feel the crunch, especially looking ahead as we reach the height of summer and inevitably turn back towards shorter days and colder nights.
As one of the leading solutions to the rapidly accelerating energy crisis, LNG is stepping up to the plate to help alleviate incidents shaping our world at present. At the end of June, G7 leaders met to agree on bolstering investments in European gas projects as a way of tackling this energy crisis head on.3 In a statement, the leaders declared that “with a view to accelerating the phase out of our dependency on Russian energy, we stress the important role increased deliveries of LNG can play, and acknowledge that investment in this sector is necessary in response to the current crisis”.4
There are many countries, such as the US, that are at the ready to supply LNG to an ever-growing list of customers, as governments make efforts to obtain energy security. That being said, it has not all been plain sailing for the US. A fire at Freeport LNG’s liquefaction facility means the plant will be shut down until at least late 2022.5 This has been a knock for US LNG, as the facility accounts for 17% of the country’s LNG export capacity.6 The US Energy Information Administration (EIA) reported that the shutdown caused an estimated 2.0 billion ft3/d drop in US export capacity, and that exports will remain below average at 10.5 billion ft3/d in 2H22, as well as Henry Hub natural gas spot prices declining. However, the EIA also projects that production levels will bounce back by spring 2023.7
This August issue of LNG Industry contains many articles covering the topics mentioned here, from ‘Setting the course for carbon neutrality’ starting on p.20 and ‘Delivering decarbonisation’ on p.37, to how the Russia-Ukraine conflict is creating contract complexities in Asia in an article entitled ‘Flexibility from uncertainty’, beginning on p.52.
It seems that world events are creating a perfect storm for the energy sector, and with all the twists and turns that this year has brought so far, who knows what could happen next. What is clear, though, is that countries are turning to LNG to help navigate these unprecedented times. Make sure to hold on tight, we are in for a bumpy ride over the next few months.
- Met Office, ‘Record breaking temperatures for the UK’, July 2022.
- Independent, ‘Russia cuts gas through Nord Stream 1 to 20% of capacity’, July 2022.
- Bloomberg, ‘G-7 leaders favour LNG investment in U-turn due to energy crisis’, June 2022.
- European Council, ‘G7 Leaders’ Communiqué’, June 2022.
- Freeport LNG, ‘Freeport LNG provides update on 8 June incident at its liquefaction site’, June 2022.
- US Energy Information Administration, ‘EIA forecasts U.S. LNG exports will fall 6% from the first half of 2022 to the second half of the year, following Freeport outage’, July 2022.
- US Energy Information Administration, ‘U.S. natural gas supply and demand balance shifts amid outage at Freeport LNG’, July 2022.