Past Gas. Gas Exports are a Problem. Does Europe Even Need It?
Above, US fossil gas prices, showing vividly the effect of Russia’s invasion of Ukraine. In the immediate aftermath, Europe was in crisis as Russia squeezed pipeline flows of gas, and the Nordstream pipelines under the Baltic Sea were sabotaged, possibly by Ukraine.
For a minute there, it seemed like hiking Liquified Natural Gas (LNG) exports might be a long term National Security priority for the US – but Europe has shaken off its dependency on Russian gas more quickly than imagined.
Still relatively weak gas and power demand combined with strong renewable generation growth are set to offset lost Russian pipeline gas deliveries through 2024, further easing the energy crisis that struck Europe in 2022.
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In power, demand is now only expected to recover to pre-crisis levels in 2026, with rising wind and solar capacity and increased hydro and nuclear production tightening the thermal gap.
S&P Global analysts forecast the biggest declines in 2024 for gas-fired generation, while coal and lignite generation in the 10 core European markets is seen flat after falling to a record low in 2023.
With war roiling energy markets, Europe has aimed to swap gas delivered by Russian pipeline for liquefied natural gas (LNG) delivered by ship, largely from the U.S. and Qatar. From the beginning of last year, Europe has added six new LNG terminals, expanded an existing terminal, and restored a dormant terminal.
But much of that new infrastructure may prove unnecessary as European gas consumption declines, according to the Institute for Energy Economics and Financial Analysis. Europe’s recent efforts to build out renewables and curb gas consumption are paying off. After a surge in imported LNG in 2022, it has seen imports flatten out this year.
With new LNG infrastructure still coming online, the analysis found, Europe will be able to import 406 billion cubic meters of natural gas by 2030, slightly more than the 400 billion cubic meters of natural gas it is projected to consume in total.
“The decline in gas demand is challenging the narrative that Europe needs more LNG infrastructure to reach its energy security goals,” said analyst Ana Maria Jaller-Makarewicz. “The data is showing that we don’t.”
Experts have warned that new LNG infrastructure could incentivize future consumption of natural gas even as countries must cut fossil fuel use to avert dangerous climate change. A new report from the International Energy Agency finds that the global buildout of LNG infrastructure threatens to create a supply glut, which could cause prices to crater later this decade.
But a new buildout of US LNG export capacity is underway, just as research is showing LNG looks like it may be worse, even a lot worse, than coal for heat trapping emissions.
It may be that young climate activists could be holding both parties’ feet to the fire on the issue.
Breaking: we just chased Secretary Pete Buttigieg off the stage at the Meyerhoff Symphony.
Petro Pete is a coward. As we write he is ramming down our throats the Sea Port and GulfLink oil terminals – each worse than Keystone.
Clark Williams-Derry, an energy finance analyst at the Institute for Energy Economics and Financial Analysis, a think tank focused on the energy transition, forecasts that Europe’s natural-gas consumption will start to drop off before most of the planned additional U.S. LNG capacity starts operating. Already, he pointed out, household gas use in Europe is well below the 2019–2021 average.
“Demand destruction is real. It’s happening,” Williams-Derry said.
If Europe’s natural-gas consumption falls as quickly as he predicts, all the new U.S. LNG capacity will be available to the rest of the global market almost as soon as it’s built. Williams-Derry sees that as a damning scenario for the climate. The more money that other countries invest in infrastructure to import, transport and burn U.S. LNG, he said, the longer they’ll want to continue using that LNG infrastructure in the future.
“If all we were talking about was building the infrastructure necessary to provide emergency provision of natural gas to Europe during wartime, that’s one thing,” said Adam Orford, an assistant professor at the University of Georgia School of Law. “But what we’re talking about is the construction of permanent facilities to export natural gas.”
They may not get as sweet a price, but there will be other markets.