IGU says 2022 “most turbulent year ever” for natural gas
VANCOUVER, July 12 – The International Gas Union (IGU), in releasing its 14th annual World LNG Report today at the LNG2023 Conference here, called 2022 the “most turbulent year” in the history of global gas markets.
But LNG, it said, demonstrated “essential value as a flexible, reliable, available energy resource for a secure energy transition.”
Global gas markets, which were already tight in the 2021 post-Covid period, were pushed into a major supply crisis in February 22 when Russia invaded Ukraine. In the wake of that military incursion, pipeline imports of Russian gas were cut, leaving a structural supply deficit in continental Europe that led to a scramble to restore energy security.
With Russian supplies lost, Europe provided higher price premiums than other world markets to attract additional LNG cargoes, and US producers alone managed to ratchet up exports to Europe to 55.2mn tonnes, a 148% increase from 2021, despite the loss of output from the Freeport LNG facility in Texas in June. For all of 2022, US LNG volumes accounted for 44% of European LNG imports, which Europe took 65% of all US LNG exports.
“LNG kept the lights on in Europe last winter, but the lack of sufficient supply on the market also drove the world spot prices to record highs, and many consumers around the world had to choose dirtier fuels, or worse yet – shut down operations,” IGU President Madam Li Yalan said. “A better, cleaner, and more secure future will require better long-term planning of energy supply and demand for an orderly transition.”
As of April 2023, global LNG trade was connecting 20 exporting markets with 48 markets with importing infrastructure, the IGU said, and the increasingly globalized LNG market “made it possible to re-route massive volumes of energy in a matter of months.”
In 2022, global liquefaction capacity grew by 4.3%, to 478.4mn tonnes/year, with 75% of the increase coming from the US, giving it the largest operational liquefaction capacity in the world, at 88.1mn tonnes/year. Approved additions to capacity, however, declined to 25.2mn tonnes/year from 50mn tonnes/year approved in 2021.
There was also record amounts of new regasification capacity approved in 2022, with some brought online in record time in Europe. More than 10 European markets, including Germany, the Netherlands, Finland, France, Croatia and Italy, initiated the construction of new infrastructure in the wake of Russia’s invasion of Ukraine, including 26 projects with a combined regasification capacity of 104.5mn tonnes/year.
Six of those have been commissioned, while another four have taken final investment decisions, together representing a total capacity of 18.8mn tonnes/year.
Very high prices at the European market entry helped make the massive redirection of LNG flows from Asia to Europe possible and balance the short-term market, while also causing demand destruction in some Asian markets, notably China and India, which saw demand fall by 19.3% and 17.7% respectively, the IGU said.
Traditionally higher Asian spot price benchmarks traded at a discount to Europe for the first time for 85% of the February 2022 to January 2023 period. Still, both Asia’s JKM and Europe’s TTF indices broke records in 2022, reaching $84.762/mn Btu and $93.813/mn Btu, respectively.
The full 2023 World LNG Report can be downloaded here.