Page 7 - GLNG Week 28 2022

GLNG COMMENTARY GLNG

according to the International Gas Union, only is also true of Azerbaijan, which delivers gas to
a small fraction of that capacity is due for launch south-east Europe via the Southern Gas Corri-
this year, including the third train of the Tangguh dor (SGC).
LNG terminal in Indonesia (5.2 bcm per year) What is clear is that Europe is set to see fur-
and the Coral-Sul FLNG in Mozambique (4.6 ther destruction of gas demand during the rest
bcm per year). In short, the global LNG mar- of the year, whether or not Russia cuts supply.
ket will remain very tight for the foreseeable Regardless of whether there is a physical short-
future, only beginning to ease up towards the age of supply, the soaring cost of gas will prompt
mid-2020s. European governments to likely restore more
Norway is the second-biggest supplier of gas coal-fired power generation, in addition to the
to Europe, and has been taking steps to ramp capacity that has already been revived. They may
up deliveries in the wake of Moscow’s invasion also have to impose rationing, such as limiting
of Ukraine. Companies have approved several households’ energy use and limiting the opera-
new Norwegian gas fields for development, tions of gas-intensive industries such as fertiliser
and some have also been reducing gas reinjec- plants and steelworks, and those industries may
tion, effectively sacrificing oil supply in order to take such steps anyway as the high cost of gas will
bolster gas exports. But there is a limit to how simply make their production uncompetitive.
quickly Norway can replace Russian gas. Indeed, Europe already seems to be hurtling towards a
its petroleum ministry estimated in late May that recession, and a cut-off in gas supply from Russia
gas supplies to Europe would only increase 8% would seal its fate. Ironically, that might be the
this year to 122 bcm, although in a normal year way that Europe successfully deprives the Krem-
this would be an impressive feat. lin of revenues to finance its war in Ukraine, as a
The largest among Europe’s North African protracted downturn would cause gas prices to
suppliers is Algeria, but there is limited scope for drop, perhaps to the low levels seen in years prior
an immediate expansion in flow, and the same to the coronavirus (COVID-19) pandemic.™

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