In the Most Turbulent Year of Gas Markets History, LNG demonstrated essential value as a flexible, reliable, available energy resource for a secure energy transition.
The International Gas Union (IGU) is releasing its 14th annual World LNG Report, the world’s most comprehensive public source of information on key developments and trends in Liquefied Natural Gas (LNG).
The IGU President, Madame Li Yalan, stressed: “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. A better, cleaner, and more secure future will require better long-term planning of energy supply and demand for an orderly transition. The case of 2022 made it clear that LNG is the flexible energy that will be necessary for the world to securely continue on the energy transition journey.”
The Most Turbulent Year in the History of Gas Markets.
In 2022, global gas markets, which were already visibly tight in the 2021 post-Covid period, were pushed into a major supply crisis after the onset of the Russia-Ukraine conflict. The decline in Russian pipeline gas left a structural gas supply deficit in continental Europe that led to a scramble to restore energy security.
Europe provided higher price premiums than the rest of the world to attract additional LNG cargoes, and the US producers managed to export 55.2 MT to Europe, a 148% increase compared to 2021 levels, despite Freeport LNG in Texas being taken offline following an accident in June 2022. LNG volumes from the US accounted for 44% of Europe’s total LNG imports while Europe accounted for 69% of total US LNG exports last year.
LNG ultimately saved the day, maintaining Europe’s energy security and allowing it to make it through the 2022 winter and keep the lights on, as Europe imported over 66% more LNG in 2022 (+50.4 MT), offsetting the energy shortage emanating from Russia’s pipeline supply loss.
LNG has again demonstrated its essential value as a flexible, reliable, and available energy resource for a secure energy transition
As of April 2023, the global LNG trade connected 20 exporting markets with 48 markets with importing infrastructure, and an increasingly globalised 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 a total of 478.4 MTPA, and 75% of the increase in 2022 came from the U.S., giving it the largest operational liquefaction capacity worldwide (88.1 MTPA).
The volume of approved liquefaction capacity declined to 25.2 MTPA compared to the 50 MTPA approved in 2021.
2022 also saw record new regasification capacity approved, and some brought online, in record time in Europe. More than 10 European markets – including Germany, the Netherlands, Finland, France, Croatia, and Italy – have initiated the construction of new infrastructure since the Russia-Ukraine conflict broke out. This includes 26 projects with a combined regasification capacity of 104.5 MTPA.
Of these, six have been commissioned. Another four terminals have taken FID and are under construction, with a total capacity of 18.8 MTPA. About 70% of the new capacity will come from floating terminals. Meanwhile, China has remained the fastest growing market for regasification growth and continued strengthening its capacity last year.
The ongoing risk of a return to 2022 conditions remains elevated, despite prices easing
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. The traditionally higher Asian spot market price benchmarks traded at a discount to the European market for the first time for 85% of the February 2022 to January 2023 period.
However, both Asia’s JKM and Europe’s TTF indices broke records in 2022,
reaching $84.762/mmBtu and $93.813/mmBtu respectively. Asian demand reduced significantly in most locations, with the two fastest growing LNG
markets in recent years, China, and India, reducing imports by 19.3% and 17.7% respectively.
While prices moderated closer to historically average levels at the start of 2023, they remain elevated with an ongoing risk of a return to 2022 conditions. Meanwhile, the European reliance on the LNG spot market remains strong (around 70% of the continent’s imports in 2022 are estimated to be sourced from the spot market) and this would increase the volatility of European gas prices.
LNG is the necessary flexible energy for a secure and achievable transition to a cleaner future
The energy crisis came at high cost, both financial and environmental, reminding the world that energy shocks of such magnitude can jeopardise progress on climate, as the high cost of natural gas last year drove consumers to switch to oil and coal wherever possible.
LNG provides energy security and supports transition, as it replaces coal and oil, accelerates integration of renewables, and paves the way to its own decarbonisation. Decarbonising the liquefaction segment of the LNG value chain offers a significant opportunity to minimise lifecycle emissions today, and this has been a positive trend across several projects.
Looking toward 2050, the sector is actively developing deeper decarbonisation athways, with renewable natural gas, or biomethane; low-carbon and renewable hydrogen; ammonia; e-methane; carbon capture utilisation and storage (CCUS) as some examples.
About the Report
Leveraging the IGU’s vast global network of more than 150 members across the entire gas value chain, in 80+ countries around the world, the report provides rich data and analysis on LNG trade, price trends, liquefaction, regasification and shipping, as well as on the significant inroads that the fuel is making as bunker fuel.
This helps to inform decision makers in business and government, whilst also demonstrating the critical role that gas plays in giving the world safe, secure and sustainable energy supply to keep the lights on, heat homes and businesses and to run essential industry.
The IGU thanks its Members and sponsors of the report for making this edition possible. The 2023 report was compiled with contributions from S&P Global Commodity Insights (Price Trends) and with Rystad Energy as the knowledge partner.
About the International Gas Union (IGU)
The International Gas Union (IGU) was founded in 1931 and is a worldwide non-profit organisation, which promotes the political, technical, and economic progress of the gas industry, seeking to demonstrate that, gas is an integral part of a sustainable global energy future. The more than 150 members of the IGU are national associations and corporations within the gas industry worldwide, working in every aspect of the gas supply chain, from production of natural, renewable, hydrogen and other low and zero-carbon gases through their transport and use. The IGU organises the main international LNG Conference and Exhibition every three years, releasing this year’s report at the LNG2023 in Vancouver, Canada