Liquefied Natural Gas Comes to Europe’s Rescue. But for How Long?

This article is part of a special report on Climate Solutions, covering efforts to make a difference around the world.

Isle of Grain, England — The calm waters near the entrance to the Medway River appear to be suitable for yachts and other tour boats, but some of the world’s largest ships wind towards the pier here. I am.

Simon Culkin, the import terminal manager for a facility called GrainLNG, is joking about making sure that none of these vessels are steered by a “learner driver.”

Some of the giants are over 1,000 feet long and carry cargo of liquefied natural gas. Once the ship is secured to a rack of pipes on a jetty, its frigid fuel flows into a huge concrete-covered storage tank 160 feet high.

When full, these giant cylinders pack an unimaginable amount of energy. Culkin estimates that it is enough to power southern England for 10 days.Upstream is London, an economic powerhouse And a huge energy consumer.

In recent months, the European energy market has experienced the greatest turmoil in memory and record prices as tensions with Russia over Ukraine have increased. However, LNG, primarily from the United States, has eased the blow to Britain and has become the lifeline of Europe.

Even if imports advance the European Union’s goal of reducing Russia’s dependence on energy, increased dependence on fuel is potentially negative, including concerns about future uncertainties and climate implications. There are also implications.

Dougper, Chief Scientist and Policy Director at Greenpeace UK, said: “Climate risk is that there is a lock on a new gas infrastructure that proves very difficult to retire,” he added.

According to Bernstein, a research firm on Wall Street, LNG imports in Europe increased by more than 50% compared to the same period last year in the first five months of 2022. In the UK, LNG imports surged in the winter, with January hitting a record high.

The UK is relatively better than other European countries in terms of energy security because it produces a significant amount of gas from offshore fields, but most EU member states have their own production. I hardly have it.

“Historically, LNG has been a small refueling fuel for the UK,” said Jack Sharples, a researcher at the Oxford Energy Institute, a research institute.

The UK sends some of the gas it receives at the three terminals to the continent via pipes beneath the North Sea.

The increase in liquefied gas has helped Europe make up for the gas shortage from Russia. Increasing LNG imports are the most important aspect of the European Union’s strategy to reduce Russia’s dependence on gas.

Russia has long supplied Europe with a wide range of energy products, but Moscow’s chokehold on the supply of gas used for heating, cooking, power generation and industry has become particularly strong, with about three-thirds of Europe’s consumption in recent years. Supplying one.

“We cannot rely on suppliers that explicitly threaten us,” said Ursula von der Leyen, President of the European Commission, outlining the proposal to make Europe independent of Russia’s energy. rice field.

Various shippers are sending fuel to Europe, but due to the surge in shale gas production, there has been a significant increase from the United States, which has grown into one of the world’s three largest LNGs since its launch eight years ago. rice field. Exporter, along with Qatar and Australia. From time to time, LNG exceeded the flow of gas in Russia. About half of the ships moored at Grain LNG last year came from the United States.

In February, President Biden agreed to ensure that at least 15 billion cubic meters of gas, about 10% of Russia’s imports, would reach Europe, an already achieved target.

Unlike most natural gas that goes through the pipeline, LNG can be shipped from anywhere you invest in the equipment needed to cool it to a liquid, a multi-billion dollar investment, so a maze of grain islands. You can go to places like. Of equipment for returning it to steam.

“Flexibility is important,” said Paul Sullivan, Head of System Features and Risk for National Grid, the utility that owns the LNG terminal.

LNG is an energy source that can make a difference in a hurry. When natural gas is cooled to minus 260 degrees Fahrenheit, its volume is reduced to 1/600 of its volume as a gas. Industry estimates indicate that large tankers can carry enough fuel to illuminate up to 70,000 homes annually.

But even though Europe eventually accepts LNG with a disclaimer from leaders like Mr. Von der Leyen for leaving gas, climate activists are billions into expensive new programs based on fossil fuels. I am concerned that I may invest the euro. Mr. Parr then said it would be difficult to retire.

It’s already happening. European countries struggle to build facilities to accept LNG After Russia invades Ukraine, Germany is Russia’s largest buyer of gas, but LNG in case Moscow cuts fuel. We are in a dangerous situation where we do not have a terminal to receive. It is sending a signal that it may do.

Berlin is currently planning to build up to four receiving units. Finland, Estonia, Italy and the Netherlands are all considering building a terminal or expanding an existing terminal. Some of these units may be floating equipment that can be towed elsewhere when the lease ends.

Liquefied gas is sold at a high price. In most cases, the main markets for LNG are Asian countries such as Japan, South Korea and China. During the first five months of 2022, Asian imports fell by 8%. This is partly because the blockade of Covid slowed demand from China.

It’s not the promises of politicians like Mr. Biden that helped shift gas from Asia to Europe, but astronomical prices, which are now about nine times higher than they were two years ago.

“To attract cargo from Asia to Europe to fill a hole made by Russia, we need to raise European prices,” Bernstein analyst Neil Beverridge said. “To do that, you need a very high price.”

Futures prices were around $ 40 per million British thermal units, an industry indicator. In terms of energy, which is comparable to more than $ 200 a barrel of oil, it is about twice the current price of the international benchmark Brent crude.

Natural gas prices in Europe are also about six times higher than those paid by American customers.

European companies that use large amounts of gas suffer a competitive disadvantage. Earlier this month, CF Industries, a major US-based fertilizer producer, said the process is heavily dependent on gas as the futures market suggests that such factories in Europe will be expensive2. “For the foreseeable future.” He said he was proposing to close one of the two UK factories.

In Europe this winter, there are concerns about gas shortages that not only keep prices high, but also lead to a variety of unwanted options, such as increasing coal burns and closing factories to distribute gas as a last resort. It has been.

There seems to be no quick or easy solution to the European energy problem. LNG is not enough to replace all of Russia’s exports to Europe or may be online in the coming years.

Today’s high prices could lead to the construction of more LNG facilities, especially in the United States, but it will take at least five years to build a new export facility, so it will take time to fill the hole left by Russia. Will be charged.

Investors are also uncertain about whether to move on. It is difficult to understand the intentions of Europe. Von der Leyen recently visited Egypt and Israel, where large gas fields are located, to increase new supplies. The agreement agreed to promote gas supply to Europe is expected to begin to reduce European Union gas consumption by 2030, perhaps considering investing billions of dollars in LNG facilities. It was softened by the warning that it was too early to give a guarantee to the investors in the market.

Massi Modio Doord, vice president of gas research at consulting firm Wood Mackenzie, said:

With today’s high LNG prices, Europe could move away from gas more rapidly than previously planned and build more wind and solar energy facilities. “The longevity of LNG demand in Europe is at stake,” Diodord said, if Europe is serious about achieving its emission reduction targets.

The National Grid is hedging that bet. The company is adding another storage tank, but with a vast 600-acre site to import or manufacture hydrogen, potentially cleaner alternatives to natural gas, and other futuristic energy sources. We also look forward to a more environmentally friendly future that may include.

The flatlands here are not only gas-handling facilities, but also several power plants and aviation fuel import terminals, all with easy access to London. For Culkin, “not so easy to find” is a treasure trove of energy.