New US-Greece LNG deal will boost Europe’s energy security

Venture Global, a US producer of liquefied natural gas (LNG) from North American basins, has secured approximately 1 million tonnes per annum (mtpa) of LNG regasification capacity at the new Greece facility. Alexandroupolis LNG receiving terminal for five years starting in 2025, Reuters reports, noting that the new vertical south-north corridor will strengthen Europe’s energy security by allowing the import of alternative natural gas supplies to the region.

“This move further integrates our business by growing our assets across the LNG supply chain, including LNG production, transportation and regasification. As a major entry point for LNG in Central and Eastern Europe, this strategically important infrastructure will be a game-changer for the region’s ability to diversify its energy and access a secure and reliable energy supply. Venture Global is proud to support these efforts as a strategic partner with volumes from both Plaquemines LNG and the upcoming CP2 LNG.” Venture Global CEO Mike Sabel said in a press release.

Renewable energy replacing gas in Europe

Norway and the US have replaced Russia as Europe’s largest gas supplier: Last year, Norway supplied Europe with 87.8 billion cubic meters of gas, accounting for 30.3% of total imports, while the US supplied 56.2 billion cubic meters, representing 19.4% of the total. . However, the US is the largest supplier of LNG to Europe: Last year, the US accounted for almost half of the continent’s total LNG imports, marking the third year in a row that The United States has supplied more LNG to Europe than any other country.

What’s interesting here is how quickly this happened: the US supplied 27%, or 2.4 billion cubic feet per day (Bcf/d), of total European LNG imports in 2021; 44% (6.5 Bcf/day) in 2022; and 48% (7.1 Bcf/d) in 2023. Obviously, Russia’s war in Ukraine played a big role in increasing Europe’s appetite for American gas. Meanwhile, Europe’s capacity to accept LNG is growing. Europe’s LNG import or regasification capacity is set to expand to 29.3 bcm/d in 2024, a 33% increase from 2021. Germany is currently adding the most LNG regasification capacity in Europe, with developers in the country adding 1.8 Bcf/d in 2023 and on track to add another 1.6 Bcf/d in 2024.

Globally, the United States delivered a record 56.9 million metric tons of LNG in the first eight months of 2024, surpassing Australia’s 54.3 million tons and Qatar’s 53.7 million tons in that period. This marks the second year in a row that US exporters have topped global export rankings.

Unfortunately, Europe has bought much less LNG from the US this year, with deliveries from January to August down 22% y/y. The slowdown was largely triggered by a sharp increase in European power production from renewable energy sources, which remain a priority for Europe’s power utilities. The share of solar and wind energy in electricity generation in Europe has increased from around 16.4% in 2022 to 20.5% so far in 2024, while the share of fossil fuel generation has decreased from around 44.6% in 2022 to 36.6% by this year. As you might expect, coal-fired power has taken the biggest hit in Europe’s energy mix, although the share of natural gas generation has also fallen from around 26% in 2022 to 22% so far this year .

Europe’s latest natural gas rally lost steam, with natural gas futures falling below 35 euros per megawatt-hour, the lowest in seven weeks, thanks to warmer weather forecasts and ample gas inventories. However, Europe’s gas stocks are 0.1 bcm higher than the corresponding period a year ago and 8.6 bcm above the five-year average. Storage capacity utilization for the entire continent is 93.4%; 95.6% in Germany, 94.9% in Italy and 91.4% in the Netherlands.

US gas producers are currently going through tough times, with a 25% annual decline in average LNG export prices in the first half of 2024, reducing revenues by $4 billion from the first half of 2023 to 13.2 billions of dollars. That was the lowest half-year revenue total since the first half of 2021 and marks a drop of more than $12 billion from the second half of 2022, when revenue from US LNG exports peaked.

By Alex Kimani for Oilprice.com

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