Global Voice of Gas Issue 4 | Vol. 2

Global Voice of Gas B Y T H E I N T E R N AT I O N A L G A S U N I O N ISSUE 4 | VOL 02

TAKING STOCK OF 2022: WHERE DOES THE MOST TURBULENT YEAR IN GLOBAL GAS MARKETS LEAD? 2022: the most turbulent year in history for gas markets

EU gas price cap: either symbolic or dangerous

Supply crunch prompts fall in gas demand

Contents FEATURES

24

2022: the most turbulent year in history for gas markets

By Rystad Energy

28

EU gas price cap: either symbolic or dangerous

34

30

Green gas goes digital

36

From the President.....4 Editor’s Note.............6 Events ..................... 8

The LNG state of play post-COP27

Supply crunch prompts fall in global gas demand

40

44

No easy way out of energy crisis for Pakistan

India sees a coal comeback amid soaring gas prices

Regional Update Middle East & Africa............................ 10

Latin America & Caribbean.....................16

South & Southeast Asia......................... 12

Europe............................................. 20

North Asia & Australasia........................14

North America.................................... 22

The opinions and views expressed by the authors in this magazine are not necessarily those of IGU, its members or the publisher. While every care has been taken in the preparation of this magazine, they are not responsible for the authors’ opinions or for any inaccuracies in the articles.

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G LO B A L VO I C E O F G A S

DECEMBER 2022

Message from the President Dear readers, gas industry colleagues, energy partners, and consumers of gas, 2022 has been the most turbulent and testing year for the energy

primary energy plays a critical role in energy security and the energy transition.

In the recent years leading up to this crisis, energy

industry, in particular gas industry and markets, ever.

security became forgotten, and long-term planning

It has also been hard on many other sectors of the

for secure and reliable supply was seemingly

economy and populations in general.

forgotten with it. This crisis reminds us that energy

The global energy crisis continues, and energy markets are rocked by conflict, high and volatile prices, low supply, and demand destruction. Energy

security should be brought back in balance with economic and environmental policy considerations.

It is imperative that the world arrives at a real plan

consumers are directly exposed to the energy crisis,

for an achievable transition toward clean, secure,

with people struggling to pay their bills due to high

and affordable energy system. It will require the

energy cost. Many had to turn down their heat this

use of molecules, such as natural gas, renewable,

winter, several regions have had to endure power

low and zero-carbon gas, including hydrogen, and

shortages, and others are walking through darker

the necessary infrastructure. Most importantly,

streets, or working remotely to conserve energy.

it will require an honest dialogue between all key

Many factories were forced to stop producing, or

players, including the gas industry, followed by

close down faced with unaffordable energy and

action to achieve common goals defined by the Paris

deficiency in raw materials.

agreement.

To navigate through the crisis, many countries had

As we bid farewell to the turbulent and

to prioritize energy security over energy transition, as

challenging year and usher in a new year of

a result we see a growing number of countries adding

hope, IGU will continue to engage with the global

coal-power capacity, and increased use of coal – the

community to facilitate the contribution of gas to a

most emitting fossil fuel – all across the world, rich

secure, sustainable, and achievable energy transition.

and developing alike. If this trajectory continues, it would be unlikely for us to achieve the Paris goals.

10-13 JULY

Let us look forward to the good we can do together in the new year.

On the upside, we are seeing a positive turn

For more information Exhibition & Sponsorship Inquiries: exhibition@lng2023.org Call for Abstracts Inquiries: papers@lng2023.org About Vancouver: www.destinationvancouver.com About the Host: www.cga.ca

The conference programme will present the industry’s leading issues, and the exhibition will host the ultimate industry marketplace.

renewables, and these trends must continue in order for the global energy balance to be restored. As we wrap up this year and reflect on its many stresses, I hope that a key lesson that can be learned from it is

Li Yalan,

and gas which supplies a quarter of the world’s

IGU President

10-13 JULY 4

G LO B A L VO I C E O F G A S

DECEMBER 2022

The largest global LNG conference and exhibition will provide a very unique platform for the global LNG industry and key stakeholders to discuss, debate and showcase the latest industry developments and opportunities.

Vancouver is a vibrant, cosmopolitan city surrounded by incredible nature and is an easily accessible destination with direct flights from many corners of the world. The event will be set at the award winning Vancouver Convention Centre, directly on the city’s harbour, within walking distance of numerous hotels, restaurants and local attractions.

toward new supply investments for gas and

that energy systems cannot be changed overnight,

The 20th International Conference and Exhibition on Liquefied Natural Gas (LNG2023), presented by the International Gas Union (IGU), Gas Technology Institute (GTI) and the International Institute of Refrigeration (IIR), is coming to Vancouver, BC, Canada, between the dates of July 10-13 2023. LNG2023 is hosted by the Canadian Gas Association (CGA).

Editors’ Note

Welcome to the 10th issue of Global Voice of Gas

In this issue of GVG, Rystad Energy provides an

magazine, an International Gas Union publication,

insightful commentary on the prospects for extra gas

produced in collaboration with Natural Gas World

supply over the coming years, and how much of those

(NGW), a new standard for the global gas community

volumes can be expected to help ease the situation

communication worldwide.

in Europe, which has seen its Russian pipeline supply

We will soon reach the end of what has been the most disruptive year in the history of the gas

drastically reduced.

Mike Fulwood, senior research fellow at the Oxford

industry, as well as the energy sector at large. The

Institute for Energy Studies, also warns in an interview

soaring cost of energy has been exacerbated by

of the implications that a proposal by EU authorities

Russia’s actions in the European market, but it has

to impose a price ceiling could have on gas supplies in

been years in the making. While the focus on the

Europe, stressing that at best, it will be ineffectual, and

mission-critical goal of reaching net-zero was right

at worst, could exacerbate the situation by deterring

and must continue, not enough attention has been

supply, undermining liquidity and posing a risk to

paid to energy security and affordability. Supply

financial markets.

investments fell behind demand growth, and the

This issue also zeroes in on the energy issues

already out-of-balance energy markets could not

affecting Asia – specifically how India and Pakistan

withstand the shock of diminishing the volumes of the

are coping with the soaring cost of gas supplies.

world’s key gas exporter. This has meant higher costs

Unfortunately, this has led to the resurgence of coal

for people and businesses, closures of production,

and other, dirtier fuels, as it has done in other parts of

and energy shortages exacerbating a global cost-of-

the world, contradicting climate goals. The issue also

living crisis as well as a global food crisis.

provides a global overview of the destruction of gas

This was one of the messages to come out of the COP27 last month, which took place for the first time on African soil since 2016. The conference ended

demand due to high prices, and the implications for coal.

We hope that you will find the insight in this issue

with countries reaching a breakthrough agreement

insightful and useful in getting a better view of the

on forming a loss and damage fund, to provide

dynamics affecting the global gas and broader energy

developing countries hit hard by the climate crisis

markets.

with the support they need. The final text from the conference also contained a provision to expand low-emissions energy, ranging from nuclear and

Tatiana Khanberg,

renewable power, but potentially also gas. The value

Strategic Communications and

of Africa’s natural gas reserves, as a means to yield

Membership Director, IGU

greater economic prosperity and lower emissions

6

on that continent and internationally, must be

Joseph Murphy,

recognised.

Editor, Natural Gas World

G LO B A L VO I C E O F G A S

DECEMBER 2022

The Numbers Stack up for LNG2023 Next thing you know it will be 2023 and we will be in

EVENTS

Another 1st: Our first time in Vancouver – a

the final countdown to LNG2023 in Vancouver on July

fabulous, easily accessible and safe host city. With the

10-13. Here are some headline numbers on LNG2023:

conference centre, restaurants, downtown, waterfront

1st: The world’s largest dedicated conference

and Stanley Park all within walking distance of many

and exhibition for LNG, which also means your most

hotels, you can look forward to a great (and effective)

effective networking opportunity in 2023. This is even

time at LNG2023. For hotel details click “VISIT”

more important at this time of energy crisis and energy

at LNG2023. Plus, Vancouver is an LNG town with

transition.

headquarters for the growing LNG industry in Canada.

10-13 JULY

Delegate registrations are now open. Book now to save

Centre close to the city’s leading hotels; most within

make sure you are kept up to date, which you can easily

US$1,180 for an early-bird delegate pass (US$3,600). A

walking distance. When you register to attend LNG2023,

proud to be the “keeper of the flame” for more than

do at ClubLNG-LNG2023. Contact me if you need any

conference registration gives you the complete LNG2023

you will gain access to an exclusive portal for hotel

half a century.

further information to help plan your participation

experience with access to all conference programme

reservations and visa invitation requests. We encourage

at LNG2023.

sessions, lunches, refreshment breaks, all LNG2023

those requiring visas to enter Canada to apply early as

from, you don’t know where you’re going”. We know

networking functions and the world’s largest dedicated

processing times remain relatively long.

exactly where we have come from with around 1,000

LNG exhibition.

20th: LNG2023 will be the twentieth in the LNG Event Series dating back to 1968 in Chicago. We are

1,000+: “If you don’t know where you’ve come

For now the most important thing you can do is

fully searchable conference papers (all the way back

LNG2023 is situated at the Vancouver Convention

RODNEY COX

to 1968) available as a permanent and growing legacy

International Gas Union

LNG2023

10-13 JULY

IRGC2024

Preparations are in High Gear for the Must Attend LNG Event of 2023 LNG2023, the 20th edition of the world’s largest LNG Conference, comes to Vancouver, Canada in July next year. The conference overview is now available to view and industry professionals will find a programme with themes spanning the process of LNG, the business of LNG, and the future of LNG. So check out what you can look forward to!

Hear from global leaders on the most timely and relevant issues then network with the thousands of LNG professionals attending.

Over 250 speakers will lead the debate on issues such as: · The effect of geopolitical risk and market volatility on LNG commercial activity · The challenges of a turbulent energy transition · Fueling the LNG innovation agenda

G LO B A L VO I C E O F G A S

Keep up to date at www.lng2023.org and start to plan now to join thousands of your LNG industry colleagues.

Director of Events,

for our industry. Check it out for free at ClubLNG-

8

Registrations for LNG2023 are now open.

· Increasing efficiencies and reducing

WGC2025

Save the date for WGC2025 Beijing: May 19-23, 2025

In October, the IGU’s Steering Committee approved

Following the success of the world’s premier conference

the theme for the IGRC2024 conference: Fuelling the

and exhibition dedicated to natural gas, WGC2022,

Innovation Agenda. This directly answers the global

the International Gas Union (IGU) now looks forward

urgency around this topic. Innovation is crucial to

to presenting the 29th edition, WGC2025 Beijing, with

· LNG’s role in Europe’s long-term energy security

achieving our goal of keeping gas as a clean, reliable,

host China Gas Society and its partner Beijing Gas

· Enabling the transition to hydrogen/ammonia

and affordable source of energy. The theme allows the

Group. The World Gas Conference promotes the role of

conference to expand its traditional focus on technical

natural gas in a sustainable future, and provides an ideal

environmental impact

research to include research academia and organisations,

opportunity for business leaders, technical experts and

has yielded an impressive selection of abstracts, peer

gas clean-tech and new technology start-ups, and an

policy makers from across the gas sector to meet over a

reviewed by our world leading programme committee

attempt to attract C-suite executives. The IGRC2024

week of conference sessions and networking events.

chaired by Philip Hagyard of Technip Energies. These

conference will include a holistic view of innovation and

This global event will take place at the China National

papers, which will be first seen at LNG2023, will then

technology by including social innovation.

Convention Centre (CNCC), located in the Olympic Park

Plus, the call for papers for the technical programme

precinct at the heart of Beijing.

form the next chapter in the history of LNG at ClubLNG-

Our next quarterly IGRC2024 webinar should

LNG2023. Here you can find a fully searchable archive of

take place the third week of January 2023. The panel

papers presented at all previous conferences, tracing 54

discussion will focus on innovation related to the global

engaging the industry to shape the global energy agenda,

years of the LNG industry’s development. Join ClubLNG-

natural gas vehicle (NGV) industry. Webinar registration

share commercial innovations and unpack the latest

LNG2023 for free access as well as receiving all updates

will open soon and details will be shared at

trends in the sector.

about LNG2023.

Gas Pathways.

Inquiries: wgc2025@chinagas.org.cn

DECEMBER 2022

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G LO B A L VO I C E O F G A S

WGC2025 will continue the IGU’s 90 year history of

DECEMBER 2022

R E G I O N A L U P D AT E

The Middle East & Africa KHALED ABUBAKR Chairman, Egyptian Gas Association.

Executive Chairman, TAQA Arabia and IGU Regional Coordinator

COP27 and “the year of Africa” » Egypt succeeded in hosting & organising the COP27 climate conference in its coastal city of Sharm ElSheikh.

It was an impressive success from the point of view of organisation, management, safety and security, which were at an impeccable level; in responsibly representing the African continent; in actively participating in all sessions, activities and events of the conference, with remarkable intellectual and scientific contributions; and with respect to the highly distinguished representation by banks, companies, industry and trade associations, universities, research institutes, NGOs and young entrepreneurs. COP27 brought together more than 45,000 participants to share ideas, solutions, and build partnerships and coalitions. Indigenous peoples, local communities, cities and civil society, including youth and children, showcased how they are addressing climate change and shared how it impacts their lives.

» COP27 closed with a breakthrough agreement to provide “loss and damage” funding for vulnerable countries hit hard by climate disasters. Developing countries have been seeking financial assistance for loss and damage – money needed to rescue and rebuild the physical and social infrastructure of countries devastated by extreme weather – for nearly three decades. Finally achieving agreement on a fund is a major milestone.

COP27

came to Sharm el-Sheikh hoping to strike lucrative gas deals.

In my capacity as the regional coordinator for Africa at the IGU as well as being the executive chairman of TAQA Arabia, a leading energy and utility provider in Egypt with a great footprint of renewable energy projects in Egypt, I got the chance to attend, speak, moderate sessions and side events during COP27. I also got the chance to join a march encouraging energy justice in Africa. During one of the sessions titled “Towards a Fair Energy Transition” attended by my colleague, IGU Vice president Andrea Stegher, we got the chance to listen to the voice of H.E Hon. Matthew Opoku Prempeh, Minister of Energy of Ghana, who expressed his vision for a fair energy transition for the African continent.

» The Russia-Ukraine conflict is directly exacerbating the food price crisis, bringing to the fore the need for food supply chain resilience. The soaring food prices combined with the impacts of climate-induced droughts could create an even grimmer outlook for food security in coming years. In addition to the food crisis, the scramble by many countries to find alternative sources to energy they used to get from Russia appears to be a setback for the climate agenda as new investments are being

- KHALED ABUBAK, IGU Regional Coordinator

made in fossil fuels and new supply routes are being created.

» Launched in July 2022 by the Egyptian minister for international cooperation, the Nexus of Water, Food and Energy (NWFE) Programme aims to accelerate the national climate agenda. The platform provides opportunities for mobilising climate finance and private investments to support Egypt’s green transition, reflecting the interlinkages and complementarity between climate action and development efforts. The programme, part of the country’s national climate change strategy 2050, has secured international support from an international consortium for its energy pillar. The NWFE energy pillar is expected to unlock at least $10bn private investment to install 10 GW of solar and wind energy by 2028, retire 5 GW of inefficient fossil-fuel capacity by 2025, and reduce an estimated CO2 emissions by 17 MTPA.

» The International Renewable Energy Agency (IRENA), cofounding partner Siemens Energy and 13 companies across all industry sectors have launched the global Alliance for Industry Decarbonization. The new alliance aims to accelerate net-zero ambitions and the decarbonisation of industrial value chains in pursuit of the Paris Agreement climate goals. The alliance was created to achieve country-specific net zero goals faster, encourage action for decarbonising industrial value chains, and enhance understanding of renewables-based solutions and their adoption by industry. It will also strengthen dialogue and coordinate action by industrial stakeholders from across the public and private sectors.

» The final text of COP27 contained a provision to boost “low-emissions energy”. That could mean many things, from wind and solar farms to nuclear reactors, and coal-fired power stations fitted with carbon capture and storage. It could also be interpreted to mean gas, which has lower emissions than coal, but is still a major fossil fuel. Many countries at COP27, particularly those from Africa with large reserves to exploit,

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G LO B A L VO I C E O F G A S

DECEMBER 2022

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G LO B A L VO I C E O F G A S

DECEMBER 2022

R E G I O N A L U P D AT E

R E G I O N A L U P D AT E

Southeast Asia on the path to net-zero emissions.

Regional Development on Carbon Capture and Storage (CCS)

to net-zero by 2050, released its Net Zero Carbon Emissions by 2050 (NZCE 2050) pathway to accelerate and advance group-wide actions and commitment towards achieving this goal. Petronas’ decarbonisation

» In its joint statement to COP27, ASEAN members

effort will involve zero routine flaring and venting, energy

underscored the importance of implementing the

efficiency, electrification and CCS.

decisions adopted at COP26 to boost financial support

ABDUL AZIZ OTHMAN President, Malaysian Gas Association and IGU Regional Coordinator

ASEAN joint statement to COP27

» During COP27, Petronas announced it would

developed countries to shift and scale up investments in

become a signatory membership to the United Nations

sustainable and climate-resilient infrastructure including

Environment Programme’s (UNEP) Oil and Gas Methane

CCUS.

Partnership 2.0 (OGMP 2.O), as well as the International Renewable Energy Agency’s (IRENA’s) global Alliance

supply and infrastructure in the ASEAN region to support its

South & Southeast Asia

for climate action in developing countries. ASEAN urged

energy transition.

Natural gas remains key for balancing the energy trilemma

» At least seven potential CCS projects have been

for Industry Decarbonisation as part of its commitment

identified In Southeast Asia and are in early development

to strengthening its methane emissions management,

stages – in Indonesia, Malaysia, Singapore and Timor-

as well as decarbonisation efforts and the scaling up of

Leste. The CCS Gundih Project in East Java, Indonesia,

cleaner energy solutions to achieve NZCE 2050.

is regarded as the first CCS pilot project in the ASEAN

» Countries around the South & Southeast Asia region are continuously making progress to address the energy trilemma

region, while the Kasawari CCS project in Malaysia is

to ensure greater energy security with reliable, affordable and

expected to be the largest offshore CCS project in the

sustainable supply, while at the same time accelerating the

world, capturing between 3.7 to 4 MTPA of CO2 from

pathway towards a low carbon future. Several countries have

2025. With the second Lang Lebah CCS project following

also pledged to achieve their sustainability goals by pushing

closely behind, Malaysia aspires to be a leading and

for investment in renewable energy sources, boosting the use

attractive regional CCS solutions hub.

of natural gas to provide electricity and cutting the use of coal.

» The national oil companies in Southeast Asia are taking the lead in driving CCS projects by collaborating

» On November 11, 2022, ASEAN member countries issued

» Southeast Asia is a vibrant and growing region, with surging

a joint statement on climate change to the 27th Session of

energy demand. Electricity demand alone has tripled over the

with international experts. Most recent collaborations

Conference of the Parties to the United Nations Framework

last two decades of growth and is expected to triple again by

include:

Convention on Climate Change (UNFCCC COP-27), where

2050, as the region’s rapidly developing economies seek to

- Malaysia’s PETRONAS and Royal Vopak N.V, the

they undermined a commitment to achieve their respective

meet surging residential and industrial demand. According to

world’s leading independent tank storage company

nationally determined contributions (NDCs).

Boston Consulting Group’s (BCG) timely analysis, natural gas

from the Netherlands signed an MoU to explore

as an important source of energy offers a path to help bridge

opportunities in developing a value chain for CCS

» The ASEAN Plan of Action for Energy Cooperation (APAEC):

the gap and will still be an important pillar of energy supply in

in Southeast Asia.

Phase II (2021-2025) outlined updated regional targets,

the region, complementing the renewable growth, balancing

-During the G20 Summit in November 2022,

towards lower GHG emissions through the energy transition.

the energy trilemma whilst maintaining economic growth for

US President Joe Biden announced the $2.5bn

APAEC Phase II emphasised the importance of the continuing

the region.

agreement between ExxonMobil and Indonesia’s

role of natural gas in a well-balanced and just energy

Pertamina on carbon capture.

transition, including the need to enhance the connectivity and

» As the energy transition progresses as an enabler of

-Thailand’s PTTEP initiated collaboration with

accessibility of gas and LNG supplies and for the region to tap

energy security, efforts are further strengthened through

Japan’s Inpex and JGC Holdings Corp (JGC) to

more of its indigenous energy resources.

emerging technologies advancement across the ASEAN region

explore the potential development of a CCS project

together with comprehensive energy policies and roadmaps

in Thailand.

» The joint statement also welcomes cross-ASEAN

established to achieve the region’s ambitions. According to

cooperation and coordination, amongst others, the

the International Energy Agency (IEA), cleaner technologies

development of the ASEAN Taxonomy for Sustainable Finance

solutions such as carbon capture, utilisation and storage

(ASEAN Taxonomy) which would help further develop gas

(CCUS) can help to put the fast-growing economies of

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G LO B A L VO I C E O F G A S

DECEMBER 2022

Regional Development on Carbon Capture and Storage (CCS) » Petronas, the first energy company in Asia to commit

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G LO B A L VO I C E O F G A S

Countries around the South & Southeast Asia region are continuously making progress to address the energy trilemma to ensure greater energy security with reliable, affordable and sustainable supply, while at the same time accelerating the pathway towards a low carbon future. Several countries have also pledged to achieve their sustainability goals by pushing for investment in renewable energy sources, boosting the use of natural gas to provide electricity and cutting the use of coal.

DECEMBER 2022

R E G I O N A L U P D AT E

R E G I O N A L U P D AT E

North Asia & Australasia SATOSHI YOSHIDA Senior Adviser, Japan Gas Association, and IGU Regional Coordinator.

» The government has called on residential and

» CNOOC is building international LNG refuelling centres in

industrial consumers to save electricity this winter. The

the Pearl River Delta and Yangtze River Delta regions. LNG

law will be amended to allow the government to request

refuelling vessels are expected to promote the use of LNG as a

large gas consumers to restrict their gas use if shortages

shipping fuel.

» Sinopec and Qatar Energy signed a long-term agreement for 4 MTPA of LNG supply over 27 years – China’s longest such

national gas demand in storage, up from seven days previously. This is part of a broader gas supply and demand plan announced in April.

» Japan and Thailand have signed a memorandum of

» South Korea revised its legislation governing the

understanding (MoU) to share LNG in times of serious

Japan

targeted at enhancing cooperation between Japan and

shortages to boost energy security. The MoU is also

on securing LNG supplies next year as the market remains

LNHG imports will now have to keep nine days of

are expected.

deal. Deliveries will start in 2026.

» Japan, the world’s second largest LNG buyer, is focusing

inventory requirements. KOGAS, the country’s only

development of its urban gas business to include LNG for vessel use in August, as part of an effort to promote its domestic LNG bunkering. LNG bunkering fuel

Thailand in the field.

suppliers will no longer require government approval

New Zealand

government must still be notified of any import plans.

on the price and volume of LNG imports, although the

» Entering November, the LNG spot price in Asia has fallen

tight. The country is relatively well-placed as many of its LNG

below $30 per mmBtu, down 60% from a record high of almost

contracts are long-term and are oil index-priced and not fully

$70 in late August, when there was concern that Europe would

exposed to spot prices. Nevertheless, the average LNG import

have insufficient natural gas this winter due to curtailed supply

cost for Japan is expected to double in 2022.

commercial and industrial gas 8%).

to expand from 1.3 MT in size in 2030 to 3.4 MT in 2040.

» As of October, Japan had 2.5 MT of natural gas in reserve,

» In March of 2021, Firstgas, New Zealand’s largest gas

Dangjin on South Korea’s northwest coast, with a new

» City gas currently accounts for approximately 9% of New Zealand’s total GHG emissions (residential 1%,

from Russia.

» This drop may have resulted from expectations of a milder

network company, announced a plan to decarbonise

equal to two weeks of demand, which is 40% higher than the five-year average. Japan imported 70.4 MT of LNG in 2021.

New Zealand’s gas pipeline network with hydrogen.

» Asia imported more LNG in November than in October,

» Earlier this year, Prime Minister Fumio Kishida announced

and will replace natural gas fully by 2050, under the

thanks to increased Chinese purchases.

that Japan will restart seven nuclear reactors by mid-2023

winter, and high levels of gas in storage in Europe.

Hydrogen will be blended with city gas starting in 2023 government’s plan, requiring new appliances. Trials in a distribution network will start in 2023. This strategy

to help reduce dependency on imported LNG. The latest

» Overall, though, Chinese LNG imports dropped in 2022

government’s energy plan shows that nuclear power will

because of the high cost of spot LNG, with supplies confined

account for 20% of the power mix by 2030, bringing the share

to long-term contractual volumes, fixed at lower prices.

back to where it was before the Fukushima disaster.

China

» The ministry of economy, trade and industry (METI) is

» Chinese LNG importers have been selling their excess

means natural gas infrastructure will continue to play an

inventories to Europe to make up for lost Russian supply. But

the current 60 years to ensure stable power supplies and also

this should end, as the National Development and Reform

reduce GHG emissions. A final decision is expected to be

Commission (NDRC) has told China’s state-owned LNG

made by the end of this year.

Oil Corporation (CNOOC) – to stop this practice as winter

» After Fukushima, Japan also resorted to more coal use. Its

approaches.

largest power producer, JERA, plans to start up a new 1.07-

global methane emissions across all sectors by at least 30% below 2020 levels by 2030. Japan, South Korea and

authorities continue to fortify natural gas infrastructure.

Besides the two existing LNG terminals which are owned

by CPC, there are three more (one by CPC, and two by

generation capacity to 50% of the energy mix by 2025.

It also wants to expand mandatory LNG reserves to 20 days by 2025 and 24 days or more by 2027.

» CPC’s Taichung LNG terminal is now undergoing its third expansion phase. This will involve installing two

» Australia’s government has said the supply of gas

commissioned in 2026. SOFREGAZ was contracted by

refuelling vessel “Offshore Oil 301” was put into service

» As it scrambles to secure enough LNG for winter, the

announced that it is considering restricting exports of

in November. The vessel, originally an LNG carrier with a

government announced a $875mn loan in October to help

capacity of 30,000 cubic metres, has been retrofitted to

utilities to pay for cargoes. The Japan Bank for International

make it capable of refuelling. Ship-to-ship refuelling, versus

Cooperation (JBIC) also announced it would lend nearly

traditional onshore refuelling, shortens the time of a ship’s

$700mn to JERA for the same purpose. According to the

port call and enhances the international competitiveness

government, JOGMEC will be able to buy LNG directly this

of ports.

winter if private firms cannot afford cargoes.

DECEMBER 2022

» Chinese Taipei imports 99% of its natural gas, and

New Zealand are also signatories.

and coal will not be disrupted by federal measures to

G LO B A L VO I C E O F G A S

Chinese Taipei

» The government’s goal is to expand gas-fired power

GW coal-fired power plant in central Japan this year.

14

LNG receiving facility expected to be completed in 2025

Australia US, the UK and the EU, collectively aimed at reducing

curb rising domestic energy prices. In August, Australia

» CNOOC announced that China’s first LNG carrier and

KOGAS plans to develop an LNG bunkering facility in

Tai Power) under construction or at the planning phase.

voluntary commitment with 122 signatories including the

importers – Sinopec, PetroChina, and China National Offshore

(KEEI), South Korea’s LNG bunkering market is expected

important role in a zero-carbon future.

» Australia joined the Global Methane Pledge this year, a

proposing to extend the lifespan of nuclear reactors beyond

According to the Korea Energy Economics Institute

LNG next year to avoid a potential shortfall in domestic supply, but this was avoided with a deal with exporters to ramp up domestic supplies.

South Korea

new LNG tanks and regasification facilities, due to be CPC for front-end engineering and design (FEED) and project management consultancy (PMC) for the project.

PECL was hired for a feasibility study and environmental impact assessment. Daigas Gas and Power Solution (DGPS), a 100% subsidiary of Osaka Gas in Japan, was awarded a FEED and technical consulting service contract for a fourth expansion phase in April this year.

» South Korea’s government raised natural gas reserve

15

G LO B A L VO I C E O F G A S

DECEMBER 2022

R E G I O N A L U P D AT E

R E G I O N A L U P D AT E

Latin America CARLOS CORTES SIMON Executive Chairman At Asociacion De Empresas De Gas Natural and IGU Regional Coordinator

The region remains one of the areas in the world with the highest energy poverty

company TotalEnergies, had not confirmed the arrival of four

of 2021. As rainfall recovered in south Brazil and the

from offshore associated gas, with reinjection volumes

LNG tankers to the country next year, which so far is a direct

northeast of Argentina, hydroelectric output increased

reaching new record levels in August 2022 (69.6 mcmpd),

effect of the conflict in Ukraine. The system operator projected

by 1.5% year on year in September, reaching 54% in

and an available supply to the market of 48.8 mcmpd.

the need for 22 vessels in 2023, and therefore unconfirmed

October and 72% of capacity in November. Industrial

vessels represent about 18% of the total estimated

demand is moderately up by 3.1% over the past three

» To make up for insufficient domestic supply, Brazil

requirement, which could compromise the safety and minimum

months, averaging a healthy 36 mcmpd average.

imports gas from Bolivia by pipeline and LNG from international suppliers. The revised contract with Bolivia

cost of supply to the National Electric System (SEN). On the other hand, supply for the Quintero terminal (SPA agreements

» Fenix, the large offshore gas development at the

calls for 20 mcmpd of take-or-pay gas, whereas LNG

between GNL Chile and Shell) has been secured through the

Austral basin was announced by the consortium of

imports vary due to the intermittent dispatch of gas-fired

confirmed 2023 ADP with 38 shipments scheduled to unload

TotalEnergies, Wintershall DEA, and Pan American

power plants.

next year.

Energy. This large project is targeted to come on stream by the end of 2024 or early 2025, and will produce 10

» There are currently five LNG terminals in operation

» In Colombia, the outlook for 2023 is promising to the extent

mcmpd of gas, offsetting supply decline in the basin in

(all FSRUs), one in construction (in the southern state

that the foundations of the 2023-2026 National Development

recent years that is expected to continue in 2023 and

of Santa Catarina) and another three planned for 2024-

» After Africa, this region remains one of the areas in the

Plan will be put in place, which will outline the path that

2024.

2025.

world with the highest energy poverty. The use of natural gas

the nation will follow during the administration of President

for cooking and heating could reduce inequality and provide

Gustavo Petro and in which natural gas will play a fundamental

» The dry shale gas wells in the Vaca Muerta formation,

» Petrobras was supposed to complete the offshore

solutions for public health. Colombia has the largest coverage

role as enabler of the transition, the reduction of inequality,

with the recently extended 3,000-metre lateral leg

pipeline Route 3 in the second half of 2022, allowing the

in the region with 67%, followed by Argentina with 61% and

sustainable mobility, food security and the fight against climate

wells, averaged more than 550,000 mcmpd of output in

supply of 18 mcmpd of gas, but completion has been

Peru with 14%.

change.

their third and fourth months of production. High initial

postponed to 2023.

production at the shallower tight gas wells at Neuquen

» In Argentina, LNG imports for winter 2023 may be lower

» In Trinidad and Tobago, despite new gas production coming

basin resulted in high production rates averaging

» The development of a number of biomethane and

than in winter 2022, as the second regasification vessel at

on stream, their total gas supply is still below LNG and

350,000 mcmpd during their second and third months of

biogas projects will work as “distributed generation.”

Bahia Blanca port has not yet been contracted, and the

domestic demand, thus paving the way for securing cross-

initial production.

Some of these projects require access to gas transport

forward prices appear to be 30% higher than the record-high

border gas from Venezuela, subject to US Sanctions.

$30 per mmBtu paid during 2022. Gas imports from Bolivia in

networks, thus the need to assure the same quality

» Gas transport capacity constraints along the Parana

standards.

2023 will require negotiations before the end of this year but

Argentina

may be lower than the average 13.5-14.0 mcmpd during the

» After peaking at 141.5 mcmpd in August 2022, gas

largest cities and where heavy industries are located),

» The emergence of hydrogen projects will cause a sharp

winter months in 2022. Gas production is expected to increase

production has fallen because of seasonal demand. Domestic

impeding adequate supply to several combined-cycle

increase in renewable energy capacity. Green hydrogen

by winter 2023, depending on the effective completion of

production at the Northwest basin of Argentina continued its

power plants. Those plants are forced to consume

and ammonia projects have been announced at Porto de

Stage I of the new gas pipeline from Neuquen basin to Buenos

longstanding decline at 6.6% year on year in October, and

mainly imported diesel to satisfy the high regional

Pecem (Northeast) and Porto do Açu (Southeast).

Aires. High activity at the Neuquen basin as well as Northern

output in the southern Austral basin (onshore and offshore)

demand. The main 570-km trunk line from the Neuquen

and Southern Santa Cruz will be maintained both regarding

declined at a more moderate rate of 4.3%. The oil-prone Golfo

basin to Salliquelo at the west of the province of

Colombia

oil and natural gas, to add additional volumes in the winter

de San Jorge basin saw a 7.8% increase in production year

Buenos Aires (Gasoducto N. Kirchner), is already under

» Colombia has one of the greatest examples of mass

months and offset the very high-priced volumes of LNG.

on year, with the development of new gas reservoirs. Despite

construction. Pipes are being laid and welded and the

gasification, with a coverage of 80% reaching 36mn

river between Buenos Aires and Rosario (Argentina’s two

transportation capacity restrictions and limited regional

pipeline is due to start up on June 20, 2023, with an

users. Colombia’s main demand comes from industrial

» In Brazil, the newly elected government will intensify

demand, incremental exports to central Chile at an average of

initial capacity of 11 mcmpd. An international tender

customers followed by residential clients.

actions to achieve its environmental goals, planning further

7.8 mcmpd during November were 38% higher than November

is underway for the supply and installation of two

development of renewable energy and reinforcing the role of

2021 and allowed for a 7.3% increase in gas supply from the

compressor stations before the 2024 winter, to expand

» This industry, according to figures from the Colombian

natural gas in the country’s energy transition in 2023. There

Neuquen basin.

capacity by a further 11 mcmpd

Natural Gas Association, contributes 1% of the national

are expansion plans for gas transport companies in Brazil with an estimated investment of 10bn realis ($2bn) over the next

» Overall domestic demand for natural gas dropped after

Brazil

five years.

a peak in the winter months. Not only did residential and

» Domestic gas production in Brazil continued to

gross domestic product (GDP), employs around 100,000 people and contributes close to $1bn/yr in royalties for the nation.

commercial demand diminish as a consequence of higher

increase, reaching 135.3 mcmpd in 2022, compared

» In Chile, in mid-November Engie informed the National

temperatures after the winter, but also demand for power

with 132.6 mcmpd in the first half of 2021. In 2022,

» Based on this, it is expected that in 2022-2024,

Electricity Coordinator that its gas supplier, fellow French

generation was significantly lower than in the similar months

approximately 86% of Brazil’s production originated

upstream investments will amount to $2.86 trillion, to

16

G LO B A L VO I C E O F G A S

DECEMBER 2022

17

G LO B A L VO I C E O F G A S

DECEMBER 2022

ensure gas supply and thus take advantage of the availability

» The impact of the Ukraine/Russia war saw ammonia prices

of this resource to leverage the energy transition.

skyrocket to nearly $1,600 per T in late-March to mid-April 2022. Prices have dropped and continued price depreciation

» In June 2022 a new president was elected (Gustavo Petro),

is expected in January and throughout the first quarter of

from the hard left. It is expected that he will move the country

2023. Europe’s gas situation remains precarious, and any

towards eliminating oil, gas, coal and all mining operations in

significant shift in either gas prices or in the ammonia market

the next 20 years, as Petro seeks to prohibit the exploration

fundamentals can significantly impact pricing.

of the extractive industry and preserve the contracts currently signed. However, recently Petro has made a statement about

» NGC achieved Gold Standard status of reporting under the

the role natural gas will play during his administration in

Global Oil and Gas Methane Partnership (OGMP) 2.0. This

reducing emissions and costs.

achievement, attained by companies with clearly elaborated

Chile

targets to reduce methane emissions by 2025, comes just one year after the company joined the OGMP community.

» During the first three quarters of the year, 55% of the imported gas came in LNG form. The remaining 45% came

» NGC also signalled its commitment to transparency and

from Argentina. This trend shows a change in the way gas is

alignment with global best practices, with the publication of its

supplied to Chile, which has principally been LNG for the last

fifth annual sustainability report, covering 2021.

13 years.

» The ministry of planning and development and the United » During the winter season, Argentina continued to export gas

Nations Development Programme launched the largest

to Chile. The volumes were lower than in the summer, but they

ever grant-funded project in T&T aimed at reducing ozone

were steady. From October onwards, these exports to Chile

depletion as well as the climate change ambitions. The Global

are set to increase considerably and will probably be even

Environmental Facility grant valued at US$5.15mn will be used

higher than in last year’s summer season.

over a four-year period to create a sustained market change towards the adoption of low-carbon refrigeration and air

» Natural gas has continued to be an important component

conditioning technologies in the country.

for electricity generation, representing 19.6% of the power mix. On the other hand, solar and wind power output has seen

» In November 2022, Hydrogen De France (HDF), launched

sustained growth and is now 27.2% of the mix. Solar and wind

its local branch, HDF TT, paving the way for the company to

even surpassed coal in terms of the share of mix, contributing

begin its first of many local hydrogen projects.

29% and 27% respectively in the last 12 months.

» Construction is expected to start in the first semester of » Finally, the energy ministry has announced the formation

2023 on two solar plants with a combined capacity of 112

of a group of experts and academics to review the regulatory

MW.. The electricity distributor T&TEC has commenced public

framework of the entire gas industry. They began their work

sensitization campaigns aimed at educating the public on the

in November, with the aim of guiding and proposing the main

transition to clean energy and diversifying energy sources.

legal modifications to (probably) regulate the access, use and development of regasification infrastructure, and the storage and transport of natural gas. These proposals should be a central part of the bill that the government will send to congress during the first semester 2023.

Trinidad & Tobago » Negotiations between the Trinidad & Tobago government and the Atlantic LNG shareholders (BP, Shell & NGC) on reaching commercial agreements for the unitisation of the Atlantic trains are still ongoing.

18

G LO B A L VO I C E O F G A S

DECEMBER 2022

INTRODUCING

R E G I O N A L U P D AT E

Europe DIDIER HOLLEAUX President of Eurogas and IGU Regional Coordinator

and supply options, countries in the west expect to be able to cope, unless the weather is unusually cold, and are now focusing their efforts on ensuring sufficient gas next spring and next winter, partly by adding an extra 10 FSRUs.

» Despite the launch of new lNG plants like Calcasieu Pass in the US and Mozambique LNG and Coral Sul in Mozambique, the supply situation in Europe next year is expected to look much like the one in the autumn of 2022.

The ongoing conflict in Ukraine means that the outlook for the European natural gas industry remains highly uncertain.

Despite some short-term relief, due to warmer than usual weather in early autumn, the situation for the European gas industry remains much the same as described in the previous GVG issue.

» The flow of Russian pipe gas to Europe has fallen from 143 bcm in 2021 to the annual equivalent of about 30 bcm since September.

» Despite this significant reduction, Europe succeeded in filling up its storages for the beginning of the winter.

» This was achieved by maximising LNG imports and making best use of Europe’s gas infrastructure, including the reverseflow at border points. This infrastructure will be reinforced

» On the demand side, many countries have introduced subsidies to limit the price paid by different categories of customers. These subsidies are very costly, and are complemented by measures to encourage reduced consumption. Some measures are set to be extended in 2024.

» Discussions are taking place between gas importers and suppliers, but few contracts have been signed to replace the lost Russian gas in the medium term.

» As long as the war in Ukraine continues, so will the European gas crisis, and resulting higher LNG prices will also impact most LNG importing countries. If the number of new long-term gas and LNG contracts that trigger new investments is not enough, existing production and liquefaction capacity globally will not be enough to replace the 110 bcm or more missing Russian supply, and the crisis may drag on beyond 2026.

with the addition of three new FSRUs by the end of the year.

BUILDING VISIBILITY OF GAS AND GAS FOCUSED TECHNOLOGY AS A PERMANENT AND GROWING PART OF THE GLOBAL ENERGY MIX

The Greece-Bulgaria pipeline has already been put into operation.

» Strong demand reduction is also needed in all European countries (figures above a 30% reduction have been reported for industry in some countries, and 10-15% are common for tertiary and domestic customers).

» Within-day and day-ahead gas prices dropped below €20 ($21) per MWh, as a result of high levels of storage and warm weather in October and November, but front-month prices stayed at around or above €100 per MWh, reflecting buyer sentiment that supply will remain tight this winter.

O F F I C I A L M E D I A PA R T N E R

» If supply does remain tight this winter, or even desperately short for some east European countries with limited storage

GASPATHWAYS.COM 20

G LO B A L VO I C E O F G A S

DECEMBER 2022

Natural gas can continue to play its significant economic and environmental role in the global energy mix for decades to come, offering clean, secure, and affordable energy for global citizens.The extent to which the industry demonstrates and effectively communicates the key role of gas in a sustainable energy future, against the backdrop of a groundswell of anxiety about climate change, environmental, economic security, and political risks will determine theextent of its continuing success.

Gas Pathways is being developed with a view to becoming the authoritative, credible, and fact-based national and international communications platform amplifying the innovation agenda around gas energy – and gas energy infrastructure; demonstrating that the natural gas sector is focused about making affordable energy available to all, and about maximizing resiliency in energy delivery.

R E G I O N A L U P D AT E

North America

Gateway project has made meaningful progress since being announced in July 2022 and highlights the value of privatepublic sector cooperation as a means to achieve economic well-being while addressing social concerns and cleaning up

TIMOTHY EGAN CEO of the Canadian Gas Association and IGU Regional Coordinator

the environment. Domestic natural gas production has seen consistent growth this year in Mexico, resulting in a drop in US imports.

» In Canada meanwhile, gas prices remain amongst the lowest

Gas production rises and rises

in the world. Despite increasing end-use demand, market conditions, and carbon taxes, natural gas remains the most

» As the world continues to weather the challenges posed by

affordable heating option in most applications – cheaper than

the various dimensions of the global energy security crisis,

electricity, propane, and heating oil. Natural gas production

the North American industry continues to build one of its

has reached record highs in Western Canada and is expected

key responses: record natural gas production (again). North

to continue growing this winter. While there is growing support

American energy prices have been affected by the pressures

for natural gas from indigenous communities in Canada and

affecting global markets, as indicated by higher-than-average

increasing pressure from international partners to expedite

prices, but in comparison to other regional markets across the

export development, senior government officials seem divided

globe North American gas remains incredibly affordable, and

on their energy security agenda. The policy framework

the continent has an abundant supply.

continues to be a roadblock, preventing Canada from capitalising on the significant global LNG demand. The good

» US midterm elections saw the Democrats hold their thin

news on that front is continued progress on LNG Canada’s

Senate control but lose the House of Representatives, likely

Kitimat, BC project which has entered its above-ground

posing some challenges for the Biden administration’s

construction phase and is on track to be operational in 2025.

aggressive emissions reduction agenda, as embodied in the Inflation Reduction Act. How natural gas will play in the new

» The timeliness of the upcoming LNG2023 conference in

congress discussions remains to be seen, but natural gas

Vancouver cannot be underemphasized given global events.

production levels continue to reach record after record, a trend

As we build towards it, the North American IGU members are

likely to continue. In addition, the US is on pace to become

working to ensure greater coordination than has existed in the

the world’s largest LNG exporter, and new gas transport and

past. As part of that, we have agreed to participate in a North

LNG export infrastructure continue to be built at a

American Natural Gas Forum in late February 2023 in Calgary,

frenzied pace.

with representatives from Mexico, the US, and Canada. Hosted

by CGA as part of its ongoing Gas Dialogues series, the event

» In Mexico, as the demand for natural gas increases, the

will be an important occasion to discuss the role of Gas in

AMLO government continues showing strong support for the

North America and the role of the North American industry in

development of new natural gas infrastructure. The Southeast

the global conversation.

22

G LO B A L VO I C E O F G A S

DECEMBER 2022

2022: the most turbulent year in history for gas markets

China’s LNG imports by contracted and uncontracted volumes (MT, % RHS) 9

100%

8

90% 80%

7

70%

6

60% 5 50% 4

40%

3

War in Ukraine pushes gas markets into structural deficit

30%

2

20%

Spot

Nov 2022

Sept 2022

Jul 2022

May 2022

Mar 2022

Jan 2022

Nov 2021

Sept 2021

Jul 2021

May 2021

Mar 2021

Jan 2021

% Spot (RHS)

2022 will be remembered as the most turbulent year in

were lifted to ~330 mcmpd by mid-March but have since

of Europe’s gas imports was through LNG. Europe also

~20% lower hydro generation. Even in the US, soaring

the history for global gas markets (so far).

slowed to a trickle of ~85 mcmpd. The period in between

continues to import large volumes of Russian-origin LNG,

power demand allowed the Henry Hub to shrug off the

saw Russia halt exports through the Yamal-Europe

having imported close to 17 MT (~23 bcm) from January

bearish impact of the Freeport outage. Between May

pipeline supplies to Europe at 247 mcmpd, having

pipeline, and then through the Nord Stream 1 line after

through November.

to July, gas’ share of the US power mix (Lower 48) had

averaged around 320 mcmpd in 2021. A milder-than-

maintenance in July. In late September, explosions from

expected winter and the impending approval of the

alleged sabotage rendered Nord Stream 1 technically

demand destruction kept European gas consumption

hemisphere, gas was called upon to support power

contentious Nord Stream 2 pipeline allowed TTF prices to

inoperable for the foreseeable future.

subdued, allowing them to hit their storage fill target of

demand as nearly 5 GW of coal fired capacity got taken

The year began on an uncertain note with Russian

decline to $25 per mmBtu before Russia sent troops into

However, high prices, demand control policies, and

Global gas production declined on the year by 0.5% as

risen from 35% to 43%. Meanwhile, in the southern

80% by August – two months in advance (as an energy

offline in Eastern Australia for planned and unplanned

Ukraine in end-February, upending global gas balances

the war with Ukraine and Europe’s directional shift to LNG

security provision in response to the crisis, the EU

maintenance.

and setting the scene for a sustained supply deficit.

led to Gazprom curtailing production. Production from

implemented a requirement for all its natural gas storage

Russia is likely to drop next year as well due to sanctions

reservoirs to be filled to at least 80% level by November).

on a rising trend across all consumption sectors.. Policy

volatile and twice went on a record-breaking streak,

risk, the exodus of foreign partners and a decline in

By mid-November, storage had hit ~95% capacity, aided

was a driving factor, with natural gas’ relatively clean

closing in August at an all-time high of over $90 per

upstream investment. Overall, the outlook for Russian

by a milder than expected start to winter. The demand

credentials touted as the bridge to a low emissions future

mmBtu. Assessments for the Asian spot LNG price

hydrocarbon production faces a downward revision from

destruction was primarily in the industrial sector as high

in place of coal and fuel oil to power Asia’s economic

replicated much of these moves in direction but not in

pre-war estimates.

gas prices and indirectly high electricity prices made

growth. Through the year however, Asia played second

production in energy-intensive facilities like steel and

fiddle to Europe as an LNG import market, a trend

fertilizer plants uncompetitive.

that will likely continue for as long as Europe is in

Since then, European gas prices have been extremely

magnitude, ranging between ~$60-$80 per mmBtu in the

The elevated spot market price environment however

Prior to the war in Ukraine, Asian gas demand was

same timeframe, as China continued their strict zero-

allowed Europe to import record volumes of LNG – high

COVID policy and other price sensitive buyers in Asia

prices attracted the needed supply rerouting many

retreated from large spot purchases.

cargoes with the fuel from other potential destinations.

demonstrated the importance of gas in the power system

devastated its industrial gas demand. The country is

Naturally, much attention was focused on how the war

24

Contracted

Nov 2020

RYSTAD ENERGY GAS AND LNG MARKETS RESEARCH

Sept 2020

Kaushal Ramesh

Jul 2020

0% May 2020

0 Mar 2020

10%

Jan 2020

1

The Northern Summer (and Southern Winter) of 2022

deficit. Rolling COVID-19-related lockdowns in China

Between January to November, the continent imported

as a fuel of last resort. Despite widespread fuel switching

expected to import less than 65 MT of LNG in 2022,

would impact Russian pipeline gas supply into Europe. In

~66% more LNG year on year, with US LNG driving the

efforts in the power sector and an increase in coal usage,

an 18% reduction from 2021. Pakistan and Bangladesh

2021, this source made up ~30% of the gas consumption

bulk of that increase. By April, Norway overtook Russian

gas fired power generation was forced to increase ~

in price sensitive South Asia were forced to endure

of the EU 27 and the UK. As the market feared an

pipeline gas as Europe’s largest gas import source, while

6.8% across the first nine months of the year due to an

rolling blackouts and curtailed industrial production

impending halt in these volumes due to sanctions by the

US LNG volumes have exceeded those of Russian pipeline

unseasonably hot summer with concurrent heatwaves,

during the summer heatwaves. Even OECD Japan

West or a potential weaponization by Russia, volumes

gas from June onwards . By November, more than half

coupled with ~15% lower nuclear power generation and

and South Korea implemented demand control and

G LO B A L VO I C E O F G A S

DECEMBER 2022

25

G LO B A L VO I C E O F G A S

DECEMBER 2022

European LNG imports by source (MT) 12

marketed, points to the US benchmark’s rising influence

to impact the market before Q2 2023. We expect both

in global markets and higher long-term LNG prices to

the TTF and the Asian spot LNG prices to average in

reflect the shipping cost of inter-basin voyages.

excess of $30 per mmBtu for 2023.

Global LNG trade in 2022 is likely to approach 400 10

of meeting elevated LNG demand has also spurred

offset supply growth from Sabine Pass Train 6, Calcasieu

a wave of regasification infrastructure investments

Pass, Coral FLNG, and Portovaya LNG.

across Europe, particularly for FSRUs which are well

Through unprecedented policy intervention, demand

8

6

4

2

Nigeria

Egypt

Angola

Nov2022

Oct 2022

Sept 2022

Aug 2022

Jul 2022

Jun 2022

May 2022

Apr 2022

Mar 2022

Feb 2022

Jan 2022

Norway

Algeria

fuel switching measures to limit consumption. In South

Pacific on Mexico’s western coast announced two SPAs

America, improved hydro power output reduced LNG

for a combined 4.6 MTPA. The project will export US gas

import requirements by close to 40% across January to

through a 14 MTPA greenfield facility and is advantaged

November.

by its geographic proximity to East Asia. In Europe,

2022 will also be remembered as the year in which

German utility EnBW signed 2 MTPA worth of SPAs

Europe overtook Asia as the center of LNG demand, while

with Venture Global running into the late 2040s. This

the US – with 56% of the LNG project pipeline through

was followed by the recent Qatar Energy/ConocoPhilips

2030 – has become the centre of future LNG supply.

2-MTPA SPA to Germany’s Bruensbuttel terminal. In MTPA Waitsia preliminary heads of agreement (HoA) into

volumes have originated. Portfolio players have been

an SPA. Woodside also signed an 0.8 MTPA SPA with

the largest buyers of US LNG with around 28 MTPA

Uniper for portfolio supply into Europe starting 2023. We

or 38 bcma of confirmed offtake. The US will play

expect LNG contracting to be particularly active over the

an important role in supplying Europe to support its

next few years as recent volatility drives a return to the

transition to renewables before redirecting offtake to

haven of term contracts and legacy SPAs from the early

Asia. Asian buyers accounted for around 12 MTPA of

2000s begin to expire.

A further 35 bcm of FSRU capacity is being developed

in reducing gas consumption by over 10% for the year to

across Poland, Greece, and Italy.

date, are poised to trigger an economic slowdown, if not

Even as its gas demand drops sharply, our base

a recession in early 2023. The full impact of this remains

scenario suggests Europe will likely import an average

unclear but price implications are skewed slightly

~130 MTPA between 2023-2040, with demand again

towards the bearish compared to this year. Nonetheless,

reaching 2021 levels only in the late 2040s. The surge

2023 is set to be another extremely challenging year, with

European demand will push global LNG demand to 609

very limited LNG supply growth (~3% to 412 MT) and at

MT in 2030 (~40 MT higher than pre-war figures), with

least 30 bcm less of Russian pipeline supplies (with Nord

the war resulting in an increase in LNG demand even as

Stream out of service). French nuclear outages, which

Europe is accelerating the energy transition. However,

plagued the European electricity market through 2022

there has likely been some damage to LNG’s prospects

are likely to at least partly roll into 2023, and Europe

in Asia as North Asian buyers, Japan and South Korea,

would need to continue demand control measures

appear to be undergoing a nuclear power generation

through next year to ensure preparedness for next winter,

renaissance, while China is now progressing towards

and quite likely the winter after that, as material LNG

a more controlled gas demand growth and using more

supply will only get added around 2025. Accordingly,

pipeline gas and domestic production for energy security

this will result in an elevated price environment reflecting

and supply diversification purposes. Emerging Asia is

a continuation of an undersupplied market and to keep

largely priced out until material new supplies are brought

consumption check while attracting marginal cargoes to

online after 2025. Nevertheless, economic growth and

Europe. The return of Chinese industrial demand could

coal’s displacement opportunities in Asia means LNG

also provide upward momentum, though this is unlikely

will continue to find a home here.

LNG imports into South Asia by country (MT) 4 3

2 1

Nov 2022

Oct 2022

Sept 2022

Aug 2022

Jul 2022

Jun 2022

May 2022

Apr 2022

Mar 2022

Feb 2022

Jan 2022

Dec 2021

Nov 2021

Oct 2021

are likely to continue as more offtake from the US is Pakistan

G LO B A L VO I C E O F G A S

Sept 2021

The large volume of Henry Hub-indexed deals, which

Aug 2021

delivery into China will run into the 2050s.

Jul 2021

and purchase agreement (SPA) with Qatar Energy, the

0 Jun 2021

demand growth centres. Three SPAs signed this year for

May 2021

project focus and long-term view on LNG demand in big

deals included Sinopec signing a 27- year-long supply

the 31.5 MTPA North Field’s expansion volumes. Mexico

However, industrial closures, which were instrumental

Contract durations in 2022 also signal a return to a

MTPA with a weighted duration of ~21 years. Notable

first announced SPA as Qatar Energy began to lock in

Europe, of which nearly 50 bcm will be through FSRUs.

Australia, Beach Energy and BP converted their 0.75-

the US from where more than 70% of 2022 contracted

offtake this year, with Chinese buyers taking some 8.7

developed over the next four years across Northwestern

resilient and is in a good position to weather this winter.

Apr 2021

Accordingly, commercial activity is concentrated in

(achieved in August), the European market has proven

Mar 2021

Peru

Dec 2021

Nov 2021

Oct 2021

Sept 2021

Qatar

deployment. Over 70 bcm of new regas capacity is being

Feb 2021

Russia

Aug 2021

Jul 2021

Jun 2021

May 2021

Apr 2021 USA

suited to Europe’s case, given their potential for rapid

control measures, and mandated storage targets

Jan 2021

Others

Mar 2021

Feb 2021

Jan 2021

0

26

The sharpened focus on energy security and urgency

Mt, 3.8% up year-on-year as unplanned outages partly

DECEMBER 2022

27

India

G LO B A L VO I C E O F G A S

Bangledesh

DECEMBER 2022

plunge or other energy sources fail to deliver.

“The commission is caught between a rock and a hard

EU gas price cap: either symbolic or dangerous

campaigns. Subsidies to consumers should be targeted,

and even if it was made enforceable there would be

providing support to the most vulnerable energy users

severe consequences for markets, including possibly a

while not undermining efforts to reduce overall demand.

risk to financial stability of markets,” Fulwood says. “It is

how long gas will play a role in the energy mix, in

impactful cap would increase the cost of doing business,

order not to deter utilities from entering into long-term

of doing trading, and make the market less efficient.”

contracts with suppliers.

At this stage it is also unclear how the cap would work in practice. The commission’s proposal only refers to the front-month TTF contract traded on the

no implication for other contract types such as intraday, month one. Traders could also move to exchanges outside EU jurisdiction, including in the US. “There are many ways of getting around a cap on a single contract on just one or more exchanges. There are plenty of other ways to trade,” Fulwood says, cautioning that nevertheless, market liquidity would be lost.

ineffectual. After all, even when the TTF front-month

European Commission in late November. But the plan

price spiked at an all-time record of €350 per MWh on

itself fails to appreciate the value and complexity of

August 26, the proposed price ceiling would not have

Europe’s liberalised gas market, and could exacerbate

been triggered, as the two-week average was still far

the continent’s energy crisis rather than alleviate it, Mike

below €275.

by withdrawing further supply from the market. An effective cap could also see parties pulling out of deals, leading to potential bankruptcies and a financial crisis.

In Fulwood’s opinion, the liberalised European market has performed remarkably well in balancing affordability and security, especially by attracting LNG supply over the past year to replace lost Russian volumes.

“The market has done exactly what it’s supposed to do, with the high prices reducing demand and attracting

month rotating presidency, would see the price ceiling

$3,000 per 1,000 cubic metres, be introduced for front-

the price can exceed the cap reduced to only five days.

month TTF derivatives. But the cap would only come

If the Czech Republic gets what it wants, the cap would

into force when the proposed threshold is breached for

have been triggered when prices soared in late August,

two weeks, and if the TTF contract price exceeded the

but at no other point in the history of TTF trading.

more supply,” he says.

Europe has also done well to shift away from oilindexed pricing and long-term contracts to more hubbased pricing and spot trading over the past decade, Fulwood believes, even though liberalised prices are currently much higher, for various other reasons

Even if the proposed cap is lowered during talks

days within two weeks. When those conditions are met,

between member states in order to be made more

the price correction mechanism would be implemented

impactful, though, Fulwood argues that it could be

the following day, TTF trades above €275 will not be

relatively easy to sidestep, on the one hand, and hinder

accepted. The mechanism can be activated from the start

buyers attracting supply, on the other. This is at a time

of next year.

when the market remains very tight and could become

G LO B A L VO I C E O F G A S

UK’s NBP exchange, he says, and Russia could respond

the Czech Republic, which currently holds the EU’s sixlowered to €220 per MWh, and the number of days that

Member states continue to debate the proposal, thus

example, could move to selling more of its gas at the

Reportedly, a new set of amendments circulated by

a “safety price ceiling” of €275 per MWh, or close to

LNG reference price by €58 for 10 consecutive trading

would pose the danger of deterring supply. Norway, for

SENIOR RESEARCH FELLOW, OXFORD INSTITUTE FOR ENERGY STUDIES

a cap on wholesale gas prices, as proposed by the

The commission on November 22 proposed that

The focus should be on reducing demand, including by promoting greater efficiency and launching more public awareness campaigns.

A more effective price cap mechanism, meanwhile,

Mike Fulwood

far without a breakthrough, with some criticising it as

Energy Studies, tells Global Voice of Gas.

28

day-ahead, and contracts further ahead than the front-

EU member states are still at odds over how to implement

Fulwood, senior research fellow at the Oxford Institute for

In the long-term, Europe needs to avoid understating

not a method for protecting consumers - far from it. An

platforms within the EU’s jurisdiction. Even then, there is

JOSEPH MURPHY

efficiency and launching more public awareness

place, in the sense that the proposal is unenforceable,

EEX platform, but it could be extended to all trading

Depending on the outcome of negotiations between EU member states, the European Commission’s proposed gas price ceiling could prove ineffectual, at best, and dangerous, at worst

on reducing demand, including by promoting greater

including Russia’s actions, COVID-19 and several years of underinvestment in global supply.

The European and the global gas market are set to remain tight for years, but in the short-term, Fulwood believes there are better ways that Europe could work towards easing the energy crisis. The focus should be

tighter if Russian flow is further reduced, temperatures DECEMBER 2022

29

G LO B A L VO I C E O F G A S

DECEMBER 2022

How ever technology may be excellent, it has a limited impact if it cannot be applied. It always requires human expertise to make the best possible decisions.

Green gas goes digital The gas industry faces big challenges with renewable gas injections. Innovative digital and data-driven solutions help gas network operators to optimise investments, to reduce operational costs and to minimise CO 2 footprint.

Geert Meulenbelt

Geert Meulenbelt is export manager for DCbrain, a Paris headquartered specialist in the design and optimization of digital network twins. With a 25-year long background in the software industry he is specifically focusing on business and partnership development with gas TSOs and DSOs.

existing natural gas supplies which only reinforces the

headquartered specialist in the design and optimization

trend towards net-zero emissions. All this means that

of digital network twins. With a 25-year long background

transporters and distributors of gas need to adapt

in the software industry he is specifically focusing on

their existing gas infrastructures for a nearly complete

business and partnership development with gas TSOs

expected transition from natural gas to green gas over the

and DSOs.

next 30 to 40 years.

Widely known for its complexity, its risks and for

digitalization and innovation with one word in mind: data.

gas industry faces a growing need for renewables

They are reconsidering the old static and time-consuming

with new actors entering the ecosystem. Today’s gas

network steering tools for a more data-driven approach,

Transportation and Distribution networks are changing at

allowing them to cope with a higher level of complexity in

an unprecedented pace.

a much better way.

Managing the injections of renewable gases such as biomethane and hydrogen is a key challenge for the gas industry today. Not only European regulations such as the Gas Package strongly promote decarbonization, the recent geo-political developments put into question

30

G LO B A L VO I C E O F G A S

simplified mathematically because the reality of certain

and investments

DCbrain: Digital twins of gas networks

31

Because of the complexity to scale to a full network,

System (GIS), a new generation of tools allows

perfect optimization exercise. This is the reason why

operational teams to have quick and deep insight and

the use of Artificial Intelligence is not only interesting,

recommendations on their networks functioning through

but increasingly necessary. However, in order for AI to

digital twins.

understand how the network works, it must be provided with data in order to reproduce the network in a datadriven way.

Exploiting Hybrid Artificial Intelligence

network operators. By using data from the network

There are clear advantages to using data and AI to build

topology, injections and consumptions; and combining

digital network twins. Its capabilities to complete non-

this data with artificial intelligence, DCbrain allows

existing data points allows it to create a model even with

network operators to visualise, calculate, analyse,

incomplete or “small” data. This being said, there is one

simulate and optimise assets and flows such as pressure,

major limitation: AI is a prisoner of the world it has to

volume and PCS (quality).

learn from.

The historical approach to simulate the behaviour

• Better forecast consumptions and allocations

network as a whole takes a lot of time and resources.

optimising the network which results in a less than

DCbrain is a software editor dedicated to gas

the network

subset of the network may be relatively easy, solving the

fewer mathematical solutions are explored when

impacts and find optimum paths in the gas network

• Simulate renewable gas inflows and their impacts on

a pipe, are simply not known. While the study of a

and topology as defined in the Geographic Information

Tools are themselves evolving and are now integrating

managers include:

parameters, such as the exact shape and rugosity of

By gathering the millions of measurements from sensors

Artificial Intelligence to simulate scenarios, analyse their

Challenges for gas Transport and Distribution network

DECEMBER 2022

• Detect errors (calibration errors, leakages, losses…)

• Optimise settings of assets, maintenance activities

This is pushing gas network managers in a race for

having expensive and capital-intensive assets, the

for a physical model to be usable they are often

and improve data quality,

EXPORT MANAGER, DCBRAIN

Geert Meulenbelt is export manager for DCbrain, a Paris

• Invoice adequately the calorific value of gas

For example, if a valve is half-closed while the input

of a network relies on physical formulas, and then

data state it is fully closed, the model will learn from

using mathematical solvers to obtain an outcome.

incorrect assumptions. As a result, the quality of the

This method has however some major drawbacks:

model will be less good and time is required to either

G LO B A L VO I C E O F G A S

DECEMBER 2022

improve the quality of the source data or to adjust the

to-understand parameters is now possible. Of course, the

digital twin model.

understanding of the network is reinforced with real-time

The DCbrain hybrid AI can be defined by two complementary approaches.

The first consists of linking physical thermodynamic laws with artificial intelligence in order to anchor the

data. This unique technology combines graphs (for a realtime network mapping) with Artificial Intelligence (for an understanding of the network’s behaviour).

laws and they become therefore the “boundaries” of the

Human beings will always remain in the driving seat

system. The second is to provide near-human intuition

Technical results are a mixture of artificial intelligence,

capabilities to optimise networks by generating such

human expertise, theoretical behaviour and data from the

intuitions artificially.

real world. How ever technology may be excellent, it has

algorithms in reality; you can never go against these

Because this Hybrid AI approach is very fast, it is

a limited impact if it cannot be applied. It always requires

possible to test more scenarios, and increase its quality.

human expertise to make the best possible decisions.

The technology used for that is called reinforcement

As a conclusion, the following elements are of vital

learning, which became famous when a model created

importance to turn technology into a success:

by Google beat the AlphaGo world champion. This technology is also particularly useful to optimise a network by evaluating the most relevant scenarios.

Scalability is also a big advantage: the number of kilometres of pipes is not a major constraint in designing

compare simulations, view alerts and impacts. collaboration is key.

• New tools may trigger organisational change. Hence

solutions.

a Customer Success Officer to ensure that value is

box effect (meaning that we no longer understand the

• The es�mated volume for prospec�ve resources is of 18,915 BCF.

• Information needs to be shared with stakeholders:

the importance at DCbrain of consistently engaging

performance as a regular AI yet without the black

• There exist at least 5 prospects and 17 leads located in the fold thrust belt and in the foreland area. The leads can be upgraded through acquisi�on of addi�onal detailed seismic and non-seismic methods to confirm closures.

• Effective decisions need visualisations to create and

a digital network model. Extrapolation is easy with digital Last but not least, Hybrid AI provides the same

Madre de Dios basin

The is a foreland basin with a prospec�ve area of 43,000 km2 and some 5,000m of sedimentary infill. The basin includes the complex fold thrust belt with outcrops of Paleozoic, Cretaceous and Ter�ary age on the south and SW bordered by a foreland basin covered by Quaternary alluvial deposits. Hydrocarbon explora�on in the Madre de Dios basin has been progressively carried out by different companies, which show the existence of a gas poten�al that has been proven with the discovery of the Candamo field.

maintained and improved over time after an initial delivery.

• A well-documented and secure IT integration process

reasoning of the model). It is much easier to acknowledge

is a prerequisite to move a tool from a proof of

what a model does by placing boundaries using physical

concept to an industrialised solution. This element

models. In addition, designing a limited number and easy-

should be taken into account right from the start.

Prospect “Kusak” Reservoirs: Vivian, Lower Chonta and Nia Avr. Depth: 5,000 m Fluid type: Gas and Condensate

There are clear advantages to using data and AI to build digital network twins.

Its capabilities to complete non-existing data points allows it to create a model even with incomplete or “small” data.

This being said, there is one major limitation: AI is a prisoner of the world it has to learn from.

Basin Area: 7.5 MM Ha. Source Rocks: Cabanillas (Devonian), Ambo (Lower Carboniferous) Reservoir Rocks: Vivian-Lower Chonta (Cretaceous), Upper Nia -Lower Nia (Permian) Fluid Type/ °API: Flow Gas and Condensate (Candamo-1X) and 50.8° (Pariamanu-1X)

AVAILABLE DATA

Wells: 7 Exploratory Wells (Wildcats) Acquired 2D Seismic: 8,272 Km (1973-2010) 2D Seismic Reprocessed 2019: 1,800 Km (PSTM), 780 Km (PSDM) 2D Seismic Enhanced by Searcher 2021: 7,923.7 Km Magnetotelluric: 2 lines with 78 sta�ons promo�on@perupetro.com.pe www.perupetro.com.pe www.UpstreamOpportuni�es.pe

32

G LO B A L VO I C E O F G A S

DECEMBER 2022

Perupetro (oficial) PERÚPETRO S.A - Oficial

PROSPECTIVE RESOURCES

06 Prospects : 5.7 TCF 21 Leads: 14.7 TCF 05 Plays (An�cline 3-4 way closure) Total: 20.4 TCF and 320.59 MMSTB LGN (2U) (Unrisked)

Promo�on Execu�ve Vilma Ruiz Burneo (vruiz@perupetro.com.pe) General Manager Daniel Hokama Kuwae (dhokama@perupetro.com.pe) Explora�on Manager Eris Gabriel Valverde (egabriel@perupetro.com.pe) Promo�on & Contrac�ng Manager Carlos Pan�goso Andonaire (cpan�goso@perupetro.com.pe) Contract Supervision Manager Carlos Bianchi Ramirez (cbianchi@perupetro.com.pe)

The LNG state of play post-COP27 LNG is poised to play an impor tant and ongoing role in creating a more sustainable future by expanding the reach of clean and abundant gas to regions located long distances from existing supply infrastructure.

The post COP27 energy landscape is characterised by continued pledges to implement measures to

years, prices are expected to remain at elevated levels

reduce emissions, but with an implementation deficit.

compared to historical averages over 2017-19, before

Commitments and actions are growing, but they still fall

COVID-19. Moreover, we expect LNG-derived coal-

well short of what is needed to limit the rise in global

to-gas substitution during this period to reduce carbon

temperatures to 1.5 °C and avert the worst effects of

emissions. With more coal power generation than the LNG

climate change.

needed to substitute for coal, it is expected that there will

The combination of the push to net-zero and a sustainable future world is expected to cost trillions of dollars and requires far more energy than renewable

be healthy LNG demand as well as a short-term fall in emissions.

Expansion in LNG export capacity is projected from

technologies alone can provide. For developed countries,

countries in Africa such as Mozambique, Australia, the

not achieving global climate targets means some

US, Canada and the Middle East. Complementing this

additional discomfort in the medium term and a rocky

is a projection of increased LNG import capacity in key

transition to a cleaner energy future; for developing

European countries.

countries, not achieving global climate and emissions

There are plans for additional LNG import capacity

targets means continuous testing of their resilience as

development in India, Thailand, Vietnam, China and

these countries teeter on the edge of viability.

Korea. Global LNG consumption could more than double

As the world moves toward cleaner energy sources, natural gas is recognised as having an important role to play in the new energy future. LNG will remain a critical

by 2030, potentially reaching over 600 MT/year under current proposals.

The expansion of LNG infrastructure in this period

input in ensuring that we achieve affordable and secure

can be considered as an unanticipated mitigation

climate mitigation.

measure against a potential lack of global climate action

In the medium term, LNG fundamentals remain strong.

34

With tight supply anticipated in the coming five

implementation to limit temperatures to 1.5 °C or 2 °C.

Global LNG markets are expected to be tight as Europe’s

However, long-term LNG expansion is generally not

quest to reduce its dependency on Russian gas increases

compatible with the potential for emissions reductions

demand for LNG. This will have knock-on effects on

(with Paris climate targets of limiting global warming to

demand growth in China and emerging Asian demand as

between 1.5 °C and 2 °C) from LNG through coal-to-gas

European markets outbid them for the limited amount of

switching has a hard limit, determined by the availability

flexible LNG supply.

of coal-based generation. Demand for LNG is expected

G LO B A L VO I C E O F G A S

DECEMBER 2022

Figure 1: Global annual nameplate (a) LNG export capacity and (b) LNG import capacity by project status—proposed (green), under-construction and approved (blue), and operating (yellow) from 1969 to 2050. All the LNG terminals are up to date of November 2020.

Source: Shuting Yang et al (2022) Environ. Res. Lett. 17 064048

to gradually decline as developed countries decarbonise,

society. Net Caribbean energy exporters face different

partially substitute renewables for LNG and ramp up their

impacts and different challenges, not least being the pace

use of hydrogen from non-fossil fuel sources.

of transition and a need to balance the use of natural

While there is no bottleneck in terms of aggregate LNG

resource endowments for economic development with

terminal import capacity, there is a potential shortfall in

the responsibility of reducing the impact of their carbon

LNG export capacity additions that can fully utilise the

footprints.

spare capacity in import terminals, as growth slows in

While transition orthodoxy and the abundant

natural gas consumption. Figure 1 shows the shifts in LNG

availability of renewable energy sources in the Caribbean

export and import capacity between 1970 and 2050.

seem to point to a direct path to renewables as the

But this is not the whole story. Most countries will

optimal strategy, unique economic challenges and

rely on a combination of mitigation actions, adaptations

lack of fiscal wiggle room make such a direct transition

to climate change, and stakeholder collaboration

impracticable. This suggests that a more optimal path for

with internal and external parties to balance the core

economies such as these may be a transition to natural

dimensions of the energy trilemma: affordability and

gas through LNG (scaled appropriately), in addition to

access, energy security and environmental sustainability.

renewables.

In addition, developing countries will have to battle

In short, LNG is poised to play an important and

a combination of fiscal constraints, limited financing

ongoing role in creating a more sustainable future by

headroom without restrictions and continued testing of

expanding the reach of clean and abundant gas to regions

infrastructure and overall viability through climate events.

located long distances from existing supply infrastructure.

Consider the Caribbean. For these economies, energy

To maximise existing resources and mitigate the loss of

resilience must include sufficiency, reliability, consistency

reserves due to stranding, an expansion of the micro-LNG

and affordability of energy supplies in the short term,

concept (LNG imports and exports, scaled down) will

with long-term infrastructure investments incorporating

be critical in the coming years as the world increasingly

environmental and sustainability concerns, and resilience

moves towards a more decentralised and distributed

to climate and other shocks. Among challenges faced

approach to power generation. Micro-liquefaction will

by Caribbean energy importers are that dependence

also accelerate the growth of LNG as a transportation fuel

on fossil fuels perpetuates a lack of energy security,

and open new markets for natural gas in regions that have

translating to risks for the economy, environment, and

traditionally relied on diesel as a primary fuel source.

This article is brought to you by The National Gas Company of Trinidad and Tobago. The opinions and views expressed in this article do not necessarily reflect those of the IGU or the publisher.

Supply crunch prompts fall in global gas demand

Natural gas demand in Europe, Jan-Oct 2022 vs 2019-2021 average, main economies (%)

50 40 30 20 10

Unlike in 2009 and 2020, supply-side factors have left gas demand unmet this year as high prices deter consumption

0 -10 -20 Germany

France

Italy

Spain

EU27

ROSS MCCRACKEN Total

Industry

Household

outlook are Europe’s desire to phase out its use of

two decades – in 2009 in the aftermath of the 2008/09

Russian gas – hitherto its largest source of imports – and

global financial crisis (-2.1%), and, in 2020, as a result of

demand conservation and destruction globally as a result

demand as the principal driver of growth, accounting

very high coal prices, stable carbon pricing and by less

the demand slump wrought by the COVID-19 pandemic

of high gas prices, particularly in the LNG spot market.

for 60% of the downgraded increase to 2025. Power

physical capacity to switch, owing to earlier closures of

generation’s contribution falls to less than 10% over the

coal plants.

(-1.6%).

This raises the question of how gas demand

This year, demand is expected to fall again, owing

will rebound, if it can, and what forces will shape

2021-25 period, as a result of high gas prices, lower

to the profound shock resulting from the war in Ukraine

its immediate and longer-term future in what will

electricity demand growth and increased renewable

demand reduction over summer came principally from

and the consequent disruption to Russia-EU gas trade.

undoubtedly be a ‘new normal’.

generation. In Europe, gas-for-power demand falls 17%

energy-intensive industries, but, by October, significant

as the region seeks to limit its exposure to gas imports.

reductions in household demand were also evident, aided

However, unlike the demand-side led declines in 2009

According to the Brussels-based think tank Bruegel,

and 2020, in 2022, consumption is expected to fall

Gas demand components

Planned distribution network expansion in China,

by warm weather. Bruegel estimates EU gas consumption

because of a lack of affordable supply, leaving gas

The IEA’s analysis of the drop in gas demand this year

India, and Iran results in higher retail consumption, but

at 10% below the average for 2019-2021 for the January-

demand unmet.

suggests less permanent demand destruction than

heating demand is expected to decline in all mature

October period, but with demand 25% lower in October.

perhaps might be expected. About 40% of its downward

markets. Some demand growth is expected in the

America, demand has continued to increase. Despite

revision is the consequence of slower economic growth.

transport sector, principally in China, India, and the

power generation has been reversed, leaving gas for

higher prices, US gas demand is expected to rise across

40% results from decisions to delay plans to switch from

Middle East.

power demand up 1% over January-October, while

all end-use sectors this year.

coal or oil to gas, alongside an increase in decisions to

In regions where gas is readily available, notably North

Future growth downgraded

Europe: at the centre of the storm

switch away from gas.

The agency says that only 20% of its downward

EU gas consumption in the second quarter dropped 16%,

Across the bloc, the second-quarter fall in gas-fired

industrial and household demand were both down 13%, according to Bruegel.

The International Energy Agency (IEA) forecasts that

revision is the result of efficiency measures and the

or 13.9 bcm year on year, according to Eurostat data. Gas

North America hits demand high

global gas demand will fall 0.5% this year and then grow

substitution of gas for other fuels and energy sources. Of

imports were up 3%, despite the slump in Russian gas

The contrast with the US could not be more evident. The

only slowly through 2025. Having previously forecast 5%

the downward revision, 55% is accounted for by mature

supplies as more pipeline gas from non-Russian sources

US Energy Information Administration (EIA) estimated

growth for the period 2021-24, equivalent to 210 bcm,

gas markets with Europe accounting for the largest

and LNG was imported, allowing Europe to refill its

in September that US gas consumption will hit a record

the IEA now estimates 2% growth, equivalent to 75 bcm.

share. China and India account for a combined 15% and

storage inventories ahead of winter.

86.6 bcfpd (2.5 bcmpd) this year, with demand increasing

However, there is a big difference between LNG and pipeline trade. Global LNG trade is expected to increase

emerging markets the remaining 30%.

The primary components of the drop in second

In terms of future demand growth, Asia-Pacific

quarter demand were reduced gas-fired generation, which

across all end-use sectors, despite sharply higher prices.

The increase is led by the power sector. The rise in

by an average of just under 4% a year from 2021-2025 (a

accounts for almost half of the increase to 2025 and the

dropped 7%, less activity on the part of energy-intensive

gas prices did not result in a significant switch back to

slower rate than in preceding years), while long-distance

Middle East one third. North America and Africa see

industries, and warmer weather limiting heating demand.

coal as a lack of coal supply and high levels of coal plant

pipeline trade drops by an average 1.9% a year. The

modest growth, while demand stagnates in South and

The drop in gas demand was particularly heavy in both

retirements stymied increased power generation from the

relatively slow growth of LNG is a function of a lack of

Central America and Eurasia, and the decline is heavily

percentage and volume terms in Germany (-22%) and the

high emissions fuel.

new investment decisions preceding the war in Ukraine.

concentrated in Europe.

Netherlands (-25%).

The two principal drivers behind the much-reduced

36

Power

Global gas consumption has fallen only twice in the last

G LO B A L VO I C E O F G A S

In terms of end user demand, the IEA sees industrial

DECEMBER 2022

The fall in gas-fired generation was stemmed by

37

G LO B A L VO I C E O F G A S

US gas prices did not reach anything like European levels, but, averaging $6.41 per mmBtu in the first eight

DECEMBER 2022

months of 2022, were about double the previous year’s

Global energy demand by source (EJ)

of total consumption in the winter.

levels and more than three times the prices seen in the

Whether gas demand rises or falls slightly over

peak COVID lockdown year of 2020. The power sector

calendar 2022, the slowdown in the rate of demand

is the largest user of gas in the US, but demand increases

growth is severe. Chinese gas demand rose 12.8% in 2021

are also forecast in the residential, commercial, and

and recorded annual average growth of 10.9% from 2011-

industrial sectors.

2021.

Asia-Pacific – established LNG importers

Emerging Asia priced out of the market

China has seen a sharp drop in LNG imports this year,

Other Asian markets have been more adversely affected.

with volumes 20% lower in the January-September

Both Pakistan and Bangladesh have had to scrap LNG

period year on year. Both Japan and South Korea have

tenders this year, receiving unaffordable offers, or none at

responded to high prices by falling back on coal and

all. Thailand has also found itself priced out of the spot

nuclear generation and eschewing spot market LNG

LNG market.

purchases where possible.

250

150

In China, which emerged as the world’s largest

Financial Crisis

50

address domestic gas deficits, leaving them with little choice but to fall back on higher fuel oil and coal imports,

the only factor reducing demand. Heavy coronavirus

as well as facing power shortages. Both have suffered

restrictions continue to have an impact on economic

extensive rolling blackouts as a result of an inability to

activity. State oil and gas company PetroChina forecasts

source spot LNG volumes.

that the country’s gas demand growth could see the

In India, gas consumption is forecast by the IEA to

lowest annual rate on record and even fall, reflecting

fall 1.5% this year and LNG import volumes in the first 8

a combination of brakes on the economy and high

months of the year were down 14% from the year earlier

international gas prices.

period. Declines in particular sectors are much more

From January-September, gas demand totalled 269.5

0 2001

for power generation, -29% for refining and -23% for

and Reform Commission, down 1.4% year on year.

chemical production.

The PetroChina forecast is significantly lower than one

result of India’s gas pooling and pricing policies – fertiliser

of 1-3% growth for the year as a whole. The eventual

production, city gas distribution, agriculture and some

outcome depends on how cold the winter proves to be.

other industries – saw small increases in demand.

China has tended to prioritise city gas use and industrial

gas prices under the country’s administrative pricing

rather than gas for power generation. According to

formula rose 110% and in the second half will increase

PetroChina, city gas demand accounts for more than 75%

a further 40% to a record $8.57 per mmBtu, affecting

2004

Gas

2005

2006

Coal

2007

2008

2009

2010

10 April - Sept 2021

38

G LO B A L VO I C E O F G A S

20 Apr - Sept 2022

30 Jan - Sept 2021

40

50

60

2016

2017

2018

2019

2020

2021

a challenging combination of heavy dependence on coal and rapid energy demand growth.

In the short-term, these plans have been badly

such as diesel or propane, while the price differential

rocked. Countries like Vietnam or the Philippines, which

in transport between compressed natural gas versus

are on the cusp of entering the LNG market, may now

gasoline or diesel has narrowed.

delay or reduce the role they see gas playing in their future energy mixes.

However, China’s response is instructive. Faced

Europe’s relationship with gas has clearly changed as a

with huge dependence on coal domestically, there is a

result of the war in Ukraine. The determination to phase

pragmatic realisation that the energy transition requires

out Russian gas imports can only be managed effectively

an ‘all of the above’ approach, one in which gas’ lower

in the context of reduced demand for the fuel as a whole.

emissions profile cannot be ignored. Chinese companies

This will require more renewables, sooner.

have this year and last been to the fore in agreeing new offtake agreements for LNG supply. This is needed to

contradictory position of encouraging non-Russian gas

underpin new capacity to rebalance a world gas market

production and imports at the same time that it pursues

thrown off kilter by Russia’s war with Ukraine.

Likewise in the US, where the EIA has identified coal-

more aggressively over what is often called the ‘longer

to-gas switching as the primary driver of reduced US

term’. This longer-term is already a time span shorter

greenhouse gas emissions in the period 2005-2019, the

than the lifetime of the assets it wants to see invested in.

process has still some distance to travel with the US coal

The growing availability of affordable gas as a source

0

2015

distribution from an expected 20-25% to 8-10% this year.

Other regions find themselves in less ambivalent

China LNG

2014

agency CRISIL this will reduce expected growth in city gas

positions.

China Pipeline

2013

transition strategies for many emerging economies facing

policies designed to remove the fuel from its energy mix

India LNG

2012

around 60% of city gas volumes. According to ratings

However, Europe, in the short-term, finds itself in the

Chinese and Indian LNG imports fall (MT)

2011

Renewables

What next?

In the first half of the fiscal year (April-March), natural

consumption, and to a lesser extent gas in transport,

2003

Industrial users are switching to oil-based alternatives,

Other users, which receive some price protection as a

made in August by the National Energy Administration

2002

Oil

severe; -28% year on year for the period January-August

bcm, according to data from the National Development

Pandemic

100

Pakistan and Bangladesh are dependent on LNG to

importer of LNG last year, high gas prices have not been

War in Ukraine

200

fleet still more than 250 GW strong.

Gas’s reputation as an affordable and secure source of energy has certainly been tarnished by war, but new

of imported energy, led by the LNG industry, provided

investment, demand conservation and an acceleration of

a secure, low-emissions fuel able to displace coal

renewable energy deployment should eventually restore

and oil from generation mixes in both developed and

market order. At that point, most likely around 2025-27,

developing economies. In particular, and in conjunction

the world will still be heavily dependent on coal and oil,

with renewables, it formed the centrepiece of energy

and gas will still be a cleaner-burning alternative.

Jan - Sept 2022

DECEMBER 2022

39

G LO B A L VO I C E O F G A S

DECEMBER 2022

No easy way out of energy crisis for Pakistan

Volatility in the gas market this year continues to affect

In October, a tender for longer-term supply of LNG

Pakistan continues to struggle to procure LNG, and the situation is unlikely to be resolved until more supply comes onto the market in twothree years’ time.

South Asian countries’ ability to procure natural gas

over a period of 4-6 years also failed, having reportedly

imports – particularly in the cases of Pakistan and

not attracted any sellers.

ANNA KACHKOVA

Bangladesh. This has contributed to a worsening crisis in

The situation is further complicated by some hesitancy

Pakistan, which has been grappling with energy shortages,

among sellers to supply LNG to Pakistan out of concern

inflation, currency depreciation, a depletion of foreign

that the country may not be able to make payments in the

reserves and a widening current account deficit.

future.

LNG prices remain high, and Pakistan and Bangladesh

“Sellers are hesitant to sell to Pakistan,” a Wood

are among the countries increasingly finding themselves

Mackenzie senior research analyst, Raghav Mathur, tells

locked out of the spot market as they struggle to pay

GVG. “In the current LNG market situation where sellers

such prices. This situation looks unlikely to be resolved

can be choosy and picky, even the smallest changes in

anytime soon, with LNG continuing to flow to Europe as

terms and conditions can complicate matters. Hence,

European countries pivot away from Russian pipeline

a deferred payment option will only reduce Pakistan’s

gas imports and buyers such as Pakistan struggling to

chances of procuring LNG,” he says.

compete.

The situation should ease in the medium term,

Pakistan has an existing long-term supply agreement in place with Qatar that it is increasingly reliant on in

however, as new LNG supplies come onto the market

the face of its ongoing struggle to procure new volumes.

thanks to the start-up of a new wave of liquefaction

There is no immediate prospect of an improvement.

capacity. But in the meantime, Pakistan’s options look

“Pakistan will have challenges for procurement of

limited and the country may find itself forced to reduce

gas,” Mathur says. “It seems difficult that they will be

demand if it is unable to easily procure LNG or other

able to procure LNG through long-term contracts,” he

forms of fuel.

continued. “If the spot prices do come down for certain

Struggling to compete

timeframes next year, then they will have to compete against other buyers who are better equipped to price

The war in Ukraine has upended global energy flows,

that LNG away from them. However, what they can do

with European countries turning to the LNG market as

is, maybe leverage their existing relationship with Qatar

they scramble to reduce their dependence on Russian gas

under their existing long-term contracts and maybe seek

imports. And European buyers are in a stronger position

extra volume for a short duration of time next year.”

to pay higher spot prices, creating difficulties for Pakistan.

“The spot LNG is available but it’s going to the highest payer, and the highest payers at the moment are European buyers,” Rapidan Energy’s director of global gas, Alex Munton, tells Global Voice of Gas. “It’s just the harsh reality of being in this extremely tight, ultracompetitive market where there’s a significant scarcity of supply. Europe is bidding up the price of spot LNG to a level that Asian buyers like Pakistan cannot compete with, beyond the level that Pakistan is willing to pay for,” he added.

Indeed, Pakistan has repeatedly struggled to complete LNG tenders recently, having previously bought around half of its LNG on the spot market last year. It had been one of the fastest-growing LNG markets over the past few years, according to Munton. But in June, a third LNG tender for July was scrapped without any volumes procured amid reports that the only offer would have been the most expensive cargo ever delivered to the country.

40

G LO B A L VO I C E O F G A S

DECEMBER 2022

41

G LO B A L VO I C E O F G A S

Pakistan’s options look limited and the country may find itself forced to reduce demand if it is unable to easily procure LNG or other forms of fuel.

DECEMBER 2022

In a complex and changing natural gas market, our clarity is your edge. With unparalleled breadth and depth of data and insight we provide a unique and powerful perspective.

“Pakistan has an existing long-term supply agreement in place with Qatar that it is increasingly reliant on in the face of its ongoing struggle to procure new volumes.”

Exploring options

had engaged with private Russian firms over LNG imports

Against this backdrop, there has been speculation that

and that Moscow had also invited Islamabad to initiate

Pakistan could turn to Russia as its energy sources are

talks over long-term contracts to buy the super-chilled

increasingly shunned by Western buyers in particular.

fuel. This came as Russia also agreed to sell Pakistan

Indeed, Pakistani government officials visited Russia in

some discounted crude, gasoline and diesel, offering the

late November for talks on issues that included oil and

country some breathing space. However, negotiating a

gas supplies. However, turning to Russia also does not

long-term LNG contract would take time and while Russia

appear to be a straightforward proposition.

is in the process of expanding its LNG capacity, a lack of

“It is important to note that Russian gas/LNG is still flowing to various areas of the world – Europe and Asia

No short-term answer

Mathur. “Energy security is the main reason for many of

The short-term situation threatens to force Pakistan to

the countries and it seems like Pakistan might also follow

turn to alternative energy sources, and the government

the same road. From a Russian perspective, they will be

has previously said it would do so, shifting away from

wary of the fact that Pakistan will not be able to pay up as

some LNG imports to other fuels.

“Switching to alternate fuel is the only prospect left for

deals or high-volume deals will not be possible in short

Pakistan,” says Mathur. “If LNG deals do not fructify then

term.”

Pakistan will have to import oil and coal, otherwise it will

Munton, meanwhile, points out that most of Russia’s LNG is already committed to other buyers.

“Russia has two LNG projects – Sakhalin in East Siberia and Yamal LNG in West Siberia. Most of it is

lead to blackouts and an energy crisis within the country.

This could last 2-3 years, depending on global LNG market developments.”

However, Munton cautions that Pakistan’s gas market

spoken for,” Munton says. “It doesn’t hold a lot of spot

is “not easily replaceable” with alternative sources of

capacity and flexible supply itself. It just doesn’t have the

energy.

volumes.”

Overriding existing customers would throw up its own

“Pakistan will have trouble getting LNG as long as Russian pipeline supplies to Europe are limited, which

challenges, and is not a move Russia is likely to make

is not likely to change in the near future,” Munton says.

unless it sees a clear political advantage in doing so. But

“Supply conditions will improve in about two-thre years,

given the misgivings about Pakistan’s ability to pay for

when the large amount of new LNG capacity that is

future volumes, such a scenario is unlikely to play out.

currently under construction globally comes online. Until

Nonetheless, Pakistan’s Minister of State Petroleum Musadik Malik said on December 5 that his government

G LO B A L VO I C E O F G A S

Opportunities in sight.

spare volumes complicates the process.

both – not out of choice but rather necessity,” says

quickly or as per Russian requirements, hence long-term

42

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then, the choice Pakistan will continue to face will be either to pay high-priced spot LNG or reduce demand.”

DECEMBER 2022

The future in focus.

India’s government has been forced to jack up domestic natural gas prices in response to soaring import costs.

CRISIL believes with high prices set to remain, Indian

This has prompted consumers to switch to alternative

city gas consumption will grow by only 8-10% this fiscal

fuels, primarily coal, spelling bad news for the country’s

year, versus an earlier projection of 20-25%.

climate objectives.

“Elevated gas prices are expected to reduce demand

The Indian government increased the regulated

for industrial PNG by 10-12% this fiscal, as price-sensitive

wholesale prices by 40% at the start of October. The price

industrial consumers switch to alternative fuels such

of domestically-produced gas is set every six months

as propane and fuel oil,” said Naveen Vaidyanathan,

through a formula linked to global rates, which have risen

director, CRISIL Ratings.

sharply in the last half-year. Record-high prices have hit

“Demand for residential PNG, although more resilient

Indian gas consumption and has forced some industries to

to higher prices, may also grow a modest 2-5% as

look for cheaper alternatives.

employees return to office with the COVID-19 pandemic

In the October 1, 2022 to March 31, 2023 period, the

subsiding. CNG demand is still expected to rise 25-30%

price paid to most domestic natural gas producers will be

on the back of an expanding network of CNG stations

$8.57 per mmBtu, up from $6.1 per mmBtu in the April

to new geographic areas and higher sales of factory-

1 to September 30, 2022 period. The government also

fitted CNG cars, despite narrowing price differential with

announced an increase in the price of gas from difficult-

competing petrol and diesel,” he added.

to-exploit fields, including those in deep waters and

City gas distributors have been taking successive price

containing high-pressure, high-temperature reservoirs, to

hikes since April 2021 to manage their cost pressures.

$12.46 per mmBtu from $9.92.

For instance, CNG prices having increased by a massive

The impact of elevated prices is visible on domestic

75%. The hike in the CNG price has reduced the cost

consumption. Demand in April through September,

advantage that the fuel enjoyed compared with gasoline

representing the first half of the 2022-2023 financial year,

and diesel, impacting the number of CNG vehicles sold in

totalled 31.48 bcm, down 4.7 % year on year, according

the country.

to the Indian government.

According to a report published by Economic Times on September 30, the Indian automobile industry has

Impact across sectors

India sees a coal comeback amid soaring gas prices

published in early October.

trimmed the estimate of the number of CNG vehicle that

The gas which falls under the administered price

will be sold in the year ending March 2023 by 25-30% to

mechanism (APM) is supplied largely to compressed

500,000-550,000. This would still be much higher than

natural gas (CNG) and domestic piped natural gas (PNG)

261,000 CNG passenger vehicles sold in India in the 2022

consumers, who contribute to 50% and 10% of the city

financial year.

gas volume, respectively, according to a CRISIL report

The Indian manufacturing sector has been bearing the

Percentage that CNG is cheaper than gasoline and diesel (Rs/km)

High gas prices are forcing India to resort to alternative fuels, including coal, and denting growth in the market for compressed natural gas as a vehicle fuel. The government is also having to shell out more in fertiliser subsidies

65%

59%

51% 37%

47%

54%

44%

42% 26%

26%

32% 14%

SHARDUL SHARMA FY20 VS Gasoline

44

G LO B A L VO I C E O F G A S

DECEMBER 2022

45

G LO B A L VO I C E O F G A S

FY21 VS Diesel

H1FY22

H2FY22

H1FY23

H2FY23*

*Assuming complete pass-on of recent hike in APM gas prices and unchanged petrol/diesel price.

Computed for Delhi. Credit: Crisil

DECEMBER 2022

brunt of high gas prices as well. According to a report published by Financial Express in early November, more than 300 of the 800 units in India’s biggest ceramic cluster

Coal’s comeback

town of Morbi in the state of Gujarat have switched from

High gas prices are also forcing India to revert to more

natural gas to more affordable propane. Reduced demand

coal-fired power, the country’s finance minister Nirmala

has forced state government-owned gas utility Gujarat

Sitharaman said recently.

Gas to cut gas supply volumes to the cluster from 7 to

“The Western world has seen countries moving to

2 mcm per day. The ceramic manufacturers of Morbi

coal. Austria has already said, and today...they are going

cannot use coal gasifiers because of court orders.

back to coal,” Press Trust of India quoted Sitharaman as

Haresh Bopaliya, president of Morbi Ceramic

of fact, it is now reviving itself as a thermal unit. So, it’s

reduction in price of gas by Gujarat Gas, propane is still

not just India, many countries have gone back. And coal is

cheaper by 15 rupees per unit. Over the past year and a

now going to be back again, because I think gas cannot be

half, the PNG price has gone up from 35 to 63 rupees per

afforded. Or it is not available as much as you want.”

The Morbi cluster accounts for more than 75% of the

Nearly half of India’s gas demand is met through imports of cost LNG. High global LNG prices contributed

total ceramic production of India. Its annual turnover is

to a 11.3% year-on-year decline in Indian imports to 11

over 450bn rupees ($5.5bn), and that includes 120bn

MT in April through September, according to the Indian

rupees worth of exports.

oil ministry. The import cost in the period was $6.6bn, up

Bloating fertiliser subsidy bill

from $5.8bn in the same period last year.

The country’s minister of coal Pralhad Joshi earlier

The India government’s fertiliser subsidy bill could

this year said in a written reply to parliament that India’s

increase by about 400bn this fiscal year from the

transition away from coal would not happen in the

previously-announced allocation of 2.15 trillion rupees,

foreseeable future. Coal demand in India is set to peak

because of the continued surge in the price of gas – a key

as late as 2030, according to government forecasts,

feedstock for producing urea. The pool gas price – the

at 1,300-1,500 MT, 63% higher than today’s level of

average price of domestic gas and imported LNG used by

consumption. But a lot will depend on the outlook for

fertiliser plants – increased from average $22 per mmBtu

global gas prices. Cheaper gas, as a result of greater

as of June to around $25 per mmBtu in September

international investment in supply, will give Indian

this year.

consumers an economic, and not just a climate incentive,

In addition to 1.05 trillion rupees approved in the federal budget for this fiscal year, an additional subsidy of 1.1 trillion rupees for fertilisers was announced in May 2022 to offset surging feedstock and product prices. While this seemed sufficient to meet this fiscal’s requirements, the continued surge in the price of gas means more support is needed, CRISIL said.

“Amid the Russia-Ukraine conflict, the price of pooled gas has risen approximately 10% quarter-on-quarter in September 2022. The earlier expectation was prices would soften gradually. Each dollar’s increase in the price of pooled gas raises the government’s subsidy burden by 70bn on domestically produced urea, which accounts for 85% of the production volume,” Vaidyanathan said.

“The price of imported urea, which accounts for the balance 15% volume, remains elevated at over about $650 per T, almost double the historical levels. Together, this could mean overall subsidies rising to 2.55 trillion

G LO B A L VO I C E O F G A S

“The Western world has seen countries moving to coal. Austria has already said, and today...they are going back to coal,” Press Trust of India quoted Sitharaman as saying during her visit to the US in October.

saying during her visit to the US in October. “The matter

Association told Financial Express that despite the recent

cubic metres, before recently being cut by 5 rupees.

46

rupees this fiscal,” he added.

to quit coal faster.

Cheaper gas, as a result of greater international investment in supply, will give Indian consumers an economic, and not just a climate incentive, to quit coal faster.

DECEMBER 2022

47

G LO B A L VO I C E O F G A S

DECEMBER 2022

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