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‘Expect High LNG Prices In Years To Come’

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Since Russia’s invasion of Ukraine upended global energy markets, the LNG industry has been grappling with many uncertainties.
In fact, the only real certainty is that spot LNG prices will remain elevated for years to come, even if they don’t hit the most recent record highs again.
Key demand centers in Europe and Asia are facing their own set of uncertainties at the end of the heating season and ahead of next winter, the peak demand period in the northern hemisphere.
Uncertainties range from how much Europe will have managed to fill its storage capacity by next November, to how much Asia will buy on the spot market to stock for the winter after lackluster demand so far this year.
LNG supply and demand will also depend on whether Russia will cut off supply to more EU customers after halting deliveries to Poland, Bulgaria, and Finland, and on how cold next winter will be in Europe and Asia.
“We have massive uncertainty over what will happen next,” Steve Hill, Executive Vice President at Shell Energy, said at this week’s World Gas Conference in South Korea.
“If we convert the Russian pipeline gas volume into Europe in 2021 into an LNG equivalent, and add on the LNG volumes delivered into Europe in 2021, that’s 200 million tonnes of LNG equivalent. That’s half the size of the current (global) LNG industry,” Hill said, as carried byReuters.
It’s clear that Europe will not be able to replace all the Russian pipeline gas with LNG soon. The world just doesn’t have that much supply capacity and will not have it until some point in the middle of this decade. Larger volumes of LNG are expected to hit the market in 2026 and afterward, when the U.S. projects under development and Qatar’s expanded capacity come on stream.
Since the energy crisis of last autumn, Europe has displaced Asia as the growth driver of LNG demand and is no longer “the market of last resort” for LNG cargoes.
“The Russian invasion of Ukraine has further spurred Europe to start reducing its heavy reliance on Russia’s piped gas, without which the continent currently risks a severe industrial slowdown and a rush to secure heating for next winter.
As of May 26, gas storage capacity in the EU was 44.45% full, while in the UK, this capacity is over 91% full, according to data from Gas Infrastructure Europe.
Storage levels in Europe are back to normal levels for this time of the year, but there is nothing normal in the global energy market this year, so LNG demand in Europe is expected to remain high through the start of the next winter season.
Moreover, the EU member states are now required to reach a minimum 80% gas storage level by November 1 to protect against potential interruptions to supply. From 2023, the target will be raised to 90% full gas storage by November 1.
“Filling the EU’s gas storage before the next winter is crucial for ensuring our security of supply,” European Commissioner for Energy Kadri Simson said last week.
While Europe will continue to race to buy much higher volumes of LNG compared to last year, the demand outlook in Asia is less certain. Asian LNG imports fell 10% year-on-year in Q1 2022, with Chinese, Japanese, and Indian imports down 11%, 14%, and 25%, respectively, Wood Mackenzie has estimated.
Overall Asian LNG demand is now expected to be flat this year compared to 2021, WoodMac says.
High spot LNG prices have priced out Asian buyers, while market volatility and uncertainties, and concerns about energy security have prompted a growing number of buyers to seek long-term contracts.
The race for LNG supply could give rise to the second wave of U.S. LNG projects, but new supply will take time to develop, Kateryna Filippenko, Principal Analyst, Global Gas Supply, at Wood Mackenzie, said last week.
But much of this new LNG supply, including from projects that have taken FIDs in previous years, is likely to come only after 2026.
Until around 2026, “Europe will have to compete with Asia for the marginal LNG molecule to satisfy demand – just as it is right now,” Filippenko noted.
“Competition between Europe and Asia for limited LNG will be intense until a new supply wave arrives after 2026. Prices will inevitably remain elevated until then.”

By: Tsvetana Paraskova
Paraskova reports for oilprice.com.

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Ex-Lawmaker Volunteers For Petroleum Sector Deregulation 

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An ex-lawmaker, Sen. Ben Murray Bruce, has announced that he is willing to serve as a volunteer in deregulating the country’s petroleum sector.
This follows the ex-lawmaker’s faulting of Nigeria losing over N5trilion annually as a result of fuel subsidy.
Bruce, who represented Bayelsa East Senatorial District in the 8th Senate, on his verified Twitter handle, decried what he described as ignorance and ineptitude of government agencies responsible for fuel subsidy.
“We cannot keep losing five trillion naira annually. I am able and willing, and I volunteer myself to lead the team to deregulate our petroleum sector.
“I will execute this flawlessly such that no Nigerian will be on the street protesting.
“The ineptitude and ignorance of the government agencies responsible for this are mind-boggling,” Bruce tweeted.

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Stakeholders Urge FG To Shift From Fossil Fuel

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Stakeholders in the extractive industry have said that as a fossil fuel dependent country, Nigeria must develop its own strategy to engage in shifting global focus away from oil.
This was the conversation at a recent one day capacity building workshop for media and Civil Society Organisations in Nigeria, organised by the Centre for Journalism Innovation and Development, through its Natural Resource and Extractive Programme, in partnership with Natural Resource Governance Institute.
The hybrid workshop, themed, “Oil Dependency in Nigeria: Imagining a Future Beyond Oil”, had over 50 participants, including journalists from the extractive sector, CSOs, and social media influencers in attendance.
The workshop, according to the organisers, was geared towards improving the understanding of oil dependency and the nexus with energy transition to better communicate the impact on Nigeria and the Nigerian economy.
Senior Officer, NRGI, Ms. Tengi George-Ikoli, explained that Nigeria was at a critical point in its development, hence as a fossil fuel-dependent country, it is important that Nigeria develops its own strategy to engage the shifting global focus away from oil.
“Nigeria must develop its own medium to long term strategy to mitigate the likely export and government revenue losses from a shrinking market base as these countries look to reducing oil reliance beyond 2030.
“Nigeria must make strategic decisions in the way it spends its limited revenues, take economic diversification more seriously, leveraging regional and global opportunities beyond oil, and including new frontier possibilities available in the green economy”, she said.
Also, Deputy Director, Development Practice, CJID, Mr. Akintunde Babatunde, said as energy transition persists globally, Nigeria as a monolithic fossil fuel dependent economy has to prepare for what the shift to cleaner energy sources means for its economy.
“Data is pointing us to the fact that Nigeria will likely lose a majority of its foreign exchange earnings and revenues for both the federal and subnational government.
“In fact, it is already happening, because Nigeria is at a critical point in its development process, it is important for professionals to discuss the way forward on how the decisions we make as a country are more important now than ever”, he said.
Earlier, the Acting Executive Director at CJID, Tobi Oluwatola, harped on the need for capacity building for the media and CSOs, noting that they are in the best position to enlighten the public from an informed perspective.
“It is time for Civil Society Organisations, journalists, and policy experts to have this discussion, most especially as Nigeria plans to achieve net zero by 2060. There is a need for CSOs to be empowered with the right skills to be able to do the right advocacy and accountability work in Nigeria”, he stated.

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Nigeria To Construct Gas Pipeline To Europe Through Morocco

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Nigeria has given the state-run Nigerian National Petroleum Corporation Limited (NNPC) the greenlight to implement a deal on construction of a gas pipeline to Europe through Morocco.
This follows reports of surging demand for African energy supplies from the EU that is seeking to wean itself of dependence on Russian oil and gas.
“This gas pipeline is to take gas to 15 West African countries and to Europe and through Morocco to Spain and others,” said the Minister of State for Petroleum Resources, Timipre Sylva.
“It is only after the engineering design of the pipeline has been made that we will know exactly (what) the cost of the pipeline will be. When that time comes, we will be talking about funding,” he added.
Nigeria is a member of the Opec group of major oil producers and has huge gas reserves – the largest proven reserves in Africa and the seventh largest globally.
On May 30, Tanzania transported 60,000 tonnes of coal to the Netherlands.
Last month, Botswana’s President, Mokgweetsi Masisi, said European nations had “flooded” his country with requests to supply coal.

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