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| The era of liquefied gas begins - good news for German consumers? (Source: Reuters) |
The global supply of liquefied natural gas (LNG) is expected to increase sharply from 2025. In the future, Russia's share in the international gas trade may decrease significantly. DW commented that for German consumers, the strong increase in LNG is good news.
The Golden Age of Natural Gas Is Coming to an End
In Germany, gas prices remain significantly more expensive than before the special military operation in Ukraine, despite measures by the federal government to limit energy prices.
When Russia cut off gas supplies to Germany last year, the government had to buy LNG from around the world. Increasing volumes of LNG are being shipped to Germany by ship.
The scarcity and high cost of this commodity on the world market has forced Europe's largest economy to spend billions of euros more to obtain the necessary volume for domestic consumption.
But things are looking up. According to the latest forecast from the International Energy Agency (IEA), global LNG supply will increase significantly as early as 2025.
In addition, demand for gas will gradually decrease. This will not only put downward pressure on LNG prices, making gas more affordable in Germany and Europe; it will also have geopolitical consequences.
The world gas market is gradually being flooded with LNG, according to IEA chief economist Tim Gould.
Fierce competition among LNG suppliers will leave natural gas flowing through Russian pipelines with only limited customers.
The IEA’s recently published World Energy Outlook 2023 report shows that from 2025, new LNG projects will increase at an unprecedented rate. By 2030, global LNG capacity will increase by 45% compared to the present. At the same time, from 2030, overall gas demand will gradually decrease.
According to the authors of the World Energy Outlook 2023 report, the “golden age of natural gas” is coming to an end.
Demand for gas for heating buildings has peaked. Now, the insulation of buildings and the rapid increase in air conditioning mean that gas demand will decline sharply in the coming years.
Even before demand fell, the global market for liquid gas was increasing.
The International Gas Union (IGU), an international association of the gas industry, confirmed the trend, stating that there are currently 668 LNG carriers and regasification vessels operating on the world’s oceans, with another 312 new vessels on shipyard order books.
Recently, US companies such as Venture and Cherniere are expanding and building new LNG facilities in Plaquemines, Louisiana, Corpus Christi and Port Arthur, Texas. More new LNG facilities are expected to come online at these locations in the coming years.
Meanwhile, the world's top three LNG exporters, the US, Australia and Qatar (each with about 20% of the global market share), have far outstripped Russia, the world's fourth-largest LNG exporter (with about 8% of the global market share). Russia currently supplies much of its LNG to Europe because Europe has no sanctions in place.
Russia lost its position?
Experts at the IEA say that Russia's future as a leading LNG exporter is not very bright.
Moscow has plans to expand LNG facilities, such as the Portovaya facility in the Baltic Sea. But the IEA sees Russia failing to return to pre-2022 levels of gas exports.
In contrast, the country's gas share in international trade, which stood at 30% in 2021, is forecast to fall to just half by 2030.
"The Kremlin's calculation that it will compensate for the loss of European customers by selling gas to Asia is not working.
The Power of Siberia 1 pipeline, which will carry natural gas from Russia to China, will have only a fraction of the capacity of the previous Nord Stream 1 pipeline in the Baltic Sea, the IEA forecast.
Moscow now wants to build a larger pipeline to China – the Power of Siberia 2 – with a capacity roughly equal to Nord Stream. But the world’s second-largest economy has yet to formally approve the project, media reports say.
IEA assessed: "Russia has lost its biggest customer - Europe".
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| Germany could access alternative gas supplies from Russia. (Source: Reuters) |
Germany adds options
At this point, Germany has access to alternative gas supplies from Russia, thanks to the rapidly growing LNG market. In addition, gas prices in Europe are likely to fall in the near future, which will reduce heating costs and electricity prices in Germany.
In Germany, after the closure of nuclear and coal power plants, the role of gas-fired power plants has increased in the context of renewable energy not being able to meet consumption demand. With high gas prices, electricity prices in general have also increased sharply in recent times.
So lower gas prices will be good news for the power sector as it reduces the production costs of power plants, at least in the medium term.
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