As the former Editor of Hydrocarbon Engineering’s sister publication – LNG Industry – I always like to keep an eye on this sector of our industry, especially during times of geopolitical turmoil. In recent analysis, Wood Mackenzie described LNG as “the most compelling investment option over the next few years” across all hydrocarbons, and it’s easy to see why.1 Given the supply implications from the Russia-Ukraine conflict, LNG stands to play an essential role as a secure and reliable source of energy around the world. For a good example, just take a look at Germany, which is fast-tracking its plans for LNG terminals as it moves to diversify away from Russian energy. Four floating storage and regasification units (FSRUs) are planned, as well as two permanent onshore sites. On 4 July, Uniper received approval to start construction work on the country’s first LNG terminal in Wilhelmshaven, with the aim of commissioning in late 2022 or early 2023.
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In its ‘2022 World LNG Report’, the International Gas Union (IGU) praised the agility of the LNG sector as it adjusted to rapidly changing market conditions.2 Last year, global LNG trade grew by 4.5%, reaching an all-time high of 372.3 million t, on the back of a surge in LNG imports following a strong post-pandemic recovery. However, the IGU notes that this strong growth highlights the urgent need for greater investment in supply to ensure that the commodity is more affordable. IGU Secretary General, Milton Catelin, said: “As the world considers its options for navigating through unprecedented times, policymakers should consider the options that are available and the time that is required to bring new supply online. The industry needs urgent policy clarity, beyond the short-term.”
In its latest ‘Gas Market Report’, the International Energy Agency (IEA) notes that natural gas’ reputation as a reliable and affordable energy source is being damaged by today’s record high gas prices, as countries around the world compete for LNG shipments.3 The report states that while there has been a recent surge in LNG investment decisions, the resulting infrastructure will not be operational until after 2025. In the short-term, LNG export capacity additions are set to slow down in the next three years due to both curtailed investment plans in the mid-2010s and construction delays during the COVID-19 pandemic. The IGU reports that, as of April 2022, 136.2 million tpy of liquefaction capacity was under construction or approved for development. Just 7.7 million tpy of that overall capacity increase is expected to come online in the second half of this year. The rest will gradually filter through between 2023 and 2027.
In a world where energy security is a growing concern, it is also essential to keep the energy transition front and centre of our thoughts. LNG is a key part of the solution, alongside decarbonised, low and zero-carbon gases. The IGU’s Milton Catelin added: “Gas is the fastest attainable and sustainable long-term vehicle to get the world back onto the energy transition path, and the inherent flexibility of LNG allows [it to be delivered] almost anywhere in the world.”
This issue of Hydrocarbon Engineering includes several articles exploring the LNG sector, and we’ll continue to closely monitor this essential market in the coming months.
- ‘Complete ban on Russian commodity exports accelerate LNG growth and energy transition’, Wood Mackenzie, (16 June 2022).
- ‘2022 World LNG Report’, IGU, (6 July 2022).
- ‘Gas Market Report, Q3-2022’, IEA, (July 2022).