Page 7 - GLNG Week 03 2023

GLNG COMMENTARY GLNG

in 2023/24. completely by 2024 at the latest,” says the IEA.
Last year Europe became the world’s biggest Other European fields in Romania can only
importer of LNG, bringing in a record 136 bcm, add an extra 0.5 bcm and those in Denmark are
mostly from the US and Qatar, that more than offline until late 2023, but even then can only add
covered the Russian shortfall, made possible 2.8 bcm. To add to Europe’s headaches is that if
by China’s economic slowdown that destroyed Russia cuts off Europe from gas completely it
demand there. Asian LNG imports fell by 7% is will be on the hook to supply Ukraine and
in 2022, after China’s imports dropped around Moldova with gas, which are both ultimately
20%, or 20 bcm, freeing more LNG for export dependent on Russia, thus pushing up the EU
to Europe. need for gas further.
This year as China phases out its no-COVID And of course the winter could still get a lot
restrictions its economy is expected to bounce colder again or the summer could be another hot
back and the global LNG market is anticipated one, both of which will increase the demand for
to be a lot tighter as a result. gas.
“If China’s LNG imports recover to their The number of heating degree days in the first
2021 levels, it would capture most of the overall eleven months of 2022 was down by around 7%
increase in global LNG supply in 2023 and limit versus the average from 2017-2021. If the num-
the LNG volumes available to the European mar- ber of heating degree days returns to the 2017-
ket. Under this assumption, we estimate that the 2021 average in 2023, then the EU would need an
European Union could increase its LNG imports addition 11 bcm gas, the IEA estimates.
by around 7 bcm in 2023,” the IEA says, well There are a lot of moving parts, making pre-
short of the circa 30 bcm additional gas imports dicting what will happen very hard. But with the
it needs. demand for gas in 2023 likely to increase over
Global LNG supply should increase by 23 last year’s demand, the IEA’s starting point for
bcm this year, says the IEA, coming from new considering gas demand in the European Union
liquefaction projects in Africa and the United in 2023 is consumption in 2022 of 360 bcm –
States. But China’s recovery will see its LNG down by around 100 bcm from pre-war levels.
imports return to their 2021 levels that will eat “This provides the baseline level of demand
up all of the new LNG production due this year. for the estimate of the supply-demand gap in
And to make matters worse, Europe’s own 2023. We assume that Europe’s gas storages will
domestic gas production continues to fall. The be around one-third full at the beginning of
EU’s own gas production fell by around 9% (3.6 April 2023, which translates into storage injec-
bcm) in the first nine months of 2022. The giant tion needs of 65 bcm over the summer in 2023
Groningen field in the Netherlands fell by more to reach a storage level of 95% at the start of the
than one-third (or 2 bcm) in that period and the 2023/24 heating season,” the IEA said.
rest of the Netherland’s production was down All told the IEA estimates that there will be
10% year on year. a total shortfall of 57 bcm this year. Happily, the
“We assume that natural gas output in the various energy saving plans, fuel switching initi-
European Union will decline by around 5% atives and demand destruction already in place
in 2023. Groningen gas production has been will cover 30 bcm of this shortfall. But that still
capped at 2.8 bcm for the Gas Year 2022/23 leaves Europe 27 bcm short, unless a five-point
(down from 4.5 bcm during the previous gas IEA action plan is put in place that could save
year) and extraction at the field is due to cease the day.™

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