5 things to know about liquefied natural gas and its role in the Ukraine crisis

The Russian invasion of Ukraine has drawn a lot of attention to the production and trade of liquefied natural gas (LNG), a key component of Russia’s energy influence in Europe.

Prior to the invasion, Russia was Europe’s third largest LNG supplier after the United States and Qatar, accounting for 20 percent of imports, according to the U.S. Energy Information Administration.

In March, following the invasion, the Biden administration announced an agreement to increase LNG exports to the EU to offset one-third of imports from Russia.

Here are five things to know about the LNG industry and its importance in the crisis in Ukraine.

This puts the United States in a strong position

The United States is already leading LNG exports to Europe by 2021, accounting for 26 percent of its imports. Even before the Russian invasion, US exports of these resources to Europe increased. Between November 2021 and January 2022 they increased from 3.4 billion to 6.5 billion cubic feet per day.

Ben Cahill, a senior fellow with the Energy Security and Climate Change Program at the Center for Strategic and International Studies, said the sector has come after “incredible growth” in the United States in recent years.

“Basically there was no LNG export industry in the United States until 2016,” Cahill told The Hill. “Now, already, we are the world’s largest exporter by capacity. It’s amazing when you think about it. Australia and Qatar have brought us from zero to more capacity in just a few short years.

He added that the change gave the United States a strategic advantage because “LNG provided flexible volumes for the market at a time when Europe was obviously in need … so it was a lucky event for LNG exporters.”

Before the invasion Russia was to expand its own LNG channel

Cahill said Russia is a “very new player” in the LNG sector, but already has two big plans. First, the Yamal LNG project is to carry 16.5 million metric tons of LNG from the port of Sabetta on the Yamal Peninsula in Russia.

The second, Arctic LNG2, was launched in 2023 with a production capacity of approximately 20 million metric tons. However, after Russia’s occupation of Ukraine by many international investors, the Italian government froze its funding. Japan and France followed suit shortly thereafter.

In Russia “a lot of projects were in line, there are [but] It is unknown at this time what he will do after leaving the post. ”

“Of course there is the possibility of seeing those who have been suspended or canceled altogether,” he added. “So, I think anyone’s guessing what Russia’s LNG future is and how it will unfold.”

US export capacity is almost at a maximum

Experts say that while the United States has stepped up LNG imports to Europe, it will not be able to do much on the supply side at some point.

“The United States exports every molecule of natural gas we can,” Samantha Cross, director of Brookings’ energy conservation and climate initiative, told The Hill. “Our LNG facilities we have are getting full … not because any politician told them, but because higher prices promote it.”

Management’s vow to increase exports to Europe, “Manufacturers produce everything they can and sell to the market where they are contracted, where they get the best price,” he said. Said.

As a result, to meet the commitment to increase supply to Europe, he said, “there must be some handouts and more to encourage buyers and reduce demand from other countries.” “There is not a ton of extra LNG capacity, waiting for Europe to deliver.”

“[With] LNG prices are so high that every manufacturer around the world has incentives to produce flat out, ”Cahill added. “So the LNG export industry is at its peak in the United States and this is an incredible arbitrage opportunity.”

The increase in exports to Europe is less than to other markets

By 2020, Asia will be the largest exporter of LNG to the United States. According to the EIA, the continent has seen a 67 percent increase in imports since 2019.

Chinese imports saw the biggest increase after China cut tariffs on US LNG imports by more than half.

With the limited supply of US LNG for export, some of the surplus shipped to Europe will be diverted from Asia. “If there is a cold winter next year in places like Northeast Asia, China, Japan and South Korea, gas demand will be strong, and those LNG cargoes will be needed there,” Cahill said.

Many buyers in Asia have long-term contracts that allow them to divert to other markets. However, “if buyers need them [imports]They are going to stay in Asia and they will need very high prices to bid from Asia to Europe, ”Cahill said.

In the meantime, however, conditions have been adjusted so that the diversion does not cause major problems, McLean said.

“US exports to Europe have grown from about 30 per cent last year to about 60 per cent in Europe now. And that means other regions, especially in Asia, would have generally gone to Asia to offset those supplies that we operate, as well as in South America,” he said.

However, the regular demand for LNG in those regions has been blunted as parts of Southeast Asia have re-enacted restrictions related to the corona virus, he added.

Environmental groups are not happy

Renewable energy advocates called the crisis in Ukraine and the associated rise in gas prices an additional incentive to convert to fossil fuels. However, many of them are dissatisfied with the emphasis on natural gas, which is mainly methane, one of the most damaging greenhouse gases.

Methane is about 25 times more efficient at capturing heat in the Earth’s atmosphere as carbon dioxide, and many advocates point to methane cutting as a quick way to reduce emissions.

“With the current international conflicts and rising energy prices, it’s time for management to move away from fossil fuels, including the suspension of LNG exports and the creation of infrastructure,” said Becky Sheppard, co – founder and managing director of WE ACT for Environmental Justice. In a statement after the US and Europe announced the deal.

“The creation of even more LNG export terminals will lock down fossil fuel infrastructure and pollution for decades to come.”

Cahill, however, said it would be an opportunity to advance emissions-reduction targets.

“A lot of people in Europe do not want to buy more gas, but the truth is they need a new gas supply to reduce their dependence on Russia,” he said.

“If they could find alternatives to low-emission Russian gas, it’s really a win – win. So the challenge for the U.S. LNG sector is, can clean gas be produced here? Can methane emissions and CO2 emissions be reduced?”

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