LNG Executives Urge EU to Increase Investments

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More investment in gas and LNG infrastructure, as well as long-term contracting, are crucial to provide energy security across Europe as the continent rapidly cuts its dependence on Russian supplies, global LNG executives told delegates at the Energy Intelligence Forum last week. “I think in the short term, our focus is on investments required for infrastructure and on some of the intra-market inefficiencies that can be addressed as well,” Shell’s Executive Vice President LNG Cederic Cremers told the conference. “It's more regasification capacity, more pipeline connections.” Similarly, the CEO of Belgian energy infrastructure firm TES Marco Alvera called for more investment to build underground storage sites in Europe, adding that LNG infrastructure can be modified and used to import green molecules in the future.

On the other side of the Atlantic, US LNG exporters are also looking to boost their gas and LNG infrastructure. Dan Brouillette, president of US developer Sempra Infrastructure, said that more investment is needed in US pipeline capacity and added that it is “important for us to think about permitting processes that would allow even more export opportunities in the United States.”

Up until recently, some US LNG project developers were struggling to obtain the necessary financing due to the lack of long-term supply commitments, particularly from European buyers. While the ongoing energy crisis has helped various US projects to get back on track, the bulk of the long-term contracts came either from global portfolio players or Asian buyers.

Portfolio players like Shell will continue to play the role of signing up for longer-term contracts with US exporters, which will permit them to supply Europe in the short term and also deliver to Asia in the long term, Cremers told delegates at the Forum. “We need 30-40 million tons of more LNG, and this requires, if we were really to sprint into action, probably $50-60-70 billion of capex,” Alvera said. Permitting, taxonomy issues and the reluctance of European buyers to sign up for 25-year LNG supply contracts were all hampering US LNG developments. “No one in the US is going to build liquefaction with a 10-year contract," Alvera said. While US supply contract durations had dropped in recent years due to buyers’ fears to commit to projects that might become stranded assets in 20-25 years, there is now “a reversion back to the more standard 15- to 20-year term for these contracts,” Brouillette said.

There was a broad consensus by participants of the Forum that the real threat for Europe will be getting through the 2023-24 winter period as there is an expectation that there will be no Russian gas to fill storage tanks during the upcoming summer season. If this is not dealt with in time, the effects of the energy crisis will filter rapidly through to the political landscape across Europe and are expected to cause major governmental turmoil. “The short and medium term is gloomy. There is a political crisis, which in my mind, is much bigger than the price crisis,” Alvera said. Mike Anderson, senior vice president of sustainability and external affairs at US independent Kosmos Energy, went even further, arguing that “every democratic government will be voted out next time round because they have failed with energy security.”

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Topics:
LNG Contracts, ENERGY INTELLIGENCE FORUM 2022, LNG Projects, LNG Demand, LNG Trade, LNG Supply, LNG Prices, Liquefaction, Regasification, Gas Supply, Gas Demand, Gas Inventories, Gas Pipelines, Ukraine Crisis
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