US LNG is both a lifeline and a drain for Europe in 2023 | Popgen Tech

Record exports of liquefied natural gas (LNG) from the United States helped soften the blow to Europe from sharply lower Russian pipeline natural gas supplies in 2022, and will remain a vital energy source for the continent in 2023.

But the rising cost of US LNG supplies – which have roughly doubled since late 2021 – looks set to come under closer scrutiny in 2023 as governments, utilities and households across Europe move to fix shattered budgets.

Rising LNG price tags were somewhat overlooked in 2022 as governments prioritized energy security above all else amid the turmoil caused by Russia’s invasion of Ukraine.

Greater focus on costs – and cost-cutting – is likely in 2023, which could however bring into stark relief how dependent Europe still is on imported energy supplies even after the painful severing of ties with Russia.

This, in turn, could further accelerate Europe’s efforts to transition away from all fossil fuels, even as the region looks set to further increase LNG imports from the United States and elsewhere to sustain vital energy supplies over the near term.

US FRONT MOUNT

US LNG exporters increased shipments to Europe by more than 137% in the first 11 months of 2022 from the same period in 2021, according to data from Kpler, which supplied more than half of Europe’s imported LNG and helped the region to withstand more than 54%. dive into pipeline shipments from Russia.

The United States looks set to remain Europe’s leading LNG seller in 2023, as US LNG exporters have larger volumes of LNG available for purchase on the spot market than other major exporters such as Qatar, and as additional US export capacity comes on stream.

US exporters also enjoy a significant freight cost advantage over Australia and Qatar – the world’s largest overall LNG exporters.

The journey time from Cove Point, USA to Brunsbuttel port in Germany – Europe’s biggest gas consumer – is about half that to the same port from Qatar, and a third of the journey time from Australia.

The only major LNG exporter closer to Europe’s top buyers is Algeria, but sellers there are expected to struggle to boost volumes available to Europe as a majority of cargoes are already spoken for by other buyers under long-term contracts become

This means the United States will remain the primary supplier of LNG to Europe for at least 2023. This is likely to generate even greater revenue for US exporters after a record 2022, which totaled $35 billion through September, up from $8.3 billion over the same period in 2021, data from the US Energy Information Administration (OIA) shows.

CLEAR COSTS

U.S. LNG exports are on track to average nearly 10 million cubic meters per month in 2022, according to Kpler, compared with an average of 4.6 million in 2021.

With Europe facing critical gas shortages as Russian pipeline volumes plunged in response to Western sanctions, every cargo of US LNG has been highly prized by energy companies tasked with keeping power supplies flowing across the continent.

But at an average of nearly $4 billion a month, the cost of those U.S. supplies has been significant, placing an increasing burden on governments and utilities that have also grappled with rising expenses in other areas.

In 2023, as the focus turns to repairing the damage caused by the Russia-Ukraine conflict, authorities are expected to weigh the value of each energy supply investment and expenditure, and determine the best use of scarce funds available sufficient supplies in the short term will ensure and help accelerate the long-term transition away from fossil fuels.

US LNG appears to be the obvious solution to fill the short-term energy supply gap.

But over the longer term, the high price of those imports could work against US LNG exporters and accelerate Europe’s drive to reduce dependence on imported energy products by generating more power at home.
Source: Reuters (Reporting by Gavin Maguire; Editing by David Evans)