The United States is uniquely poised to fill the natural gas gap in Europe using existing infrastructure, while helping the bloc meet their climate targets, according to a recent International Energy Agency report.
The report, which focuses on the natural gas supply-demand balance of the European Union in 2023, underscores the shifting supply and demand gap across Europe, as well as the increasing threat this poses to global energy security.
Big Natural Gas Gap To Fill
A previous version of the report projected a steep 57 billion cubic meters (bcm) gap for 2023, based on an analysis of the subsequent EU policy measures following Russia’s invasion of Ukraine. However, the updated IEA data predicts a smaller gap (40 bcm) for 2023. This is explained by a combination of a more stable than expected supply, as well as a decreased demand from higher-than-average winter temperatures.
Despite a smaller natural gas gap, the IEA expects further instability for next winter, particularly with Russian piped gas fully stopping in mid-February, limited LNG capacity worldwide, and China rapidly revamping its economic activity.
IEA Executive Director Fatih Birol explained:
“Even though we have enough LNG import terminals, there may not be enough gas to import and therefore it will not be easy this coming winter for Europe.”
U.S. LNG Has Proven To Be EU’s Key Partner
The IEA reports that American LNG played a “crucial role in mitigating the shortfall in Russian piped gas supply” following the unprecedented supply cuts to the European Union in 2022, adding that LNG inflows to the EU rose by a staggering 70 percent (55 bcm) compared to 2021. This was almost twice the increase in global LNG production.
As Russian piped gas supplies to the EU continue to decline – already a 35 percent decrease from December 2022 to January 2023 – U.S. exports are likely to be even more relied upon.
For context, global LNG supply is expected to increase by 4.5 percent (or 23 bcm) in 2023. And according to the report, the United States alone will account for half of the incremental supply, supported by the ramp-up of the Calcasieu Pass LNG terminal and the return of Freeport LNG.
Similarly, a recent story in Politico also stated:
“The U.S. supplied Europe with half of its LNG supply last year and is expected to cement its position as a steady source of the fuel to Germany and other EU member states. Enough export facilities, particularly around the Gulf Coast, are slated to open in the next three years to nearly double export volumes to 20 percent of overall U.S. natural gas output.”
Throughout 2022, the United States provided reliable, and affordable LNG to Europe, stabilizing their supply. The U.S. tied Qatar as the largest LNG exporter in 2022, exporting 81.2 million tons. As a result, the United States has significantly increased its prominence on the global stage, with energy analysts at Bloomberg projecting the United States will double its gas liquefaction capacity by 2027, producing 169 million metric tons of LNG export capacity.
Michael Yip, BloombergNEF’s global LNG specialist, underscored:
“The US is in the lead because of its flexible contract terms and the competitive landscape of project developers. Its aggressive but transparent pricing and reliability as an LNG supplier has made it easy for these new projects to secure contracts.”
The IEA report urges the global energy industry to continue to optimize existing infrastructure to meet future rising energy demand. With the United States prominence in both LNG and oil production, America is positioned to continue to support our allies, as well as the global economy. Under unprecedented circumstances, the U.S. oil and natural gas industry rose to meet increasing global demand, while ensuring Americans maintained access to abundant, reliable, and affordable energy.
Bottomline: The projected gap in supply and demand throughout 2023 in the European Union demonstrates a need for increased partnership with the U.S. LNG industry. The oil and gas industry is capable of meeting global demand with existing infrastructure; however, the ability to ensure a stable, reliable supply of energy will rely on global cooperation, as well as increased investments in domestic LNG production throughout the United States.
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