The short- to medium-term future of gas, as the cleanest-burning of the fossil fuels, and LNG in particular, is looking largely optimistic, as gas continues to be used as a bridging fuel during the global energy transition. However, this optimism is tempered by uncertainty and possible future price rises.
Keisuke Sadamori, director of energy markets and security for the IEA, describes 2022 as “extraordinary for global gas markets.”
“Prices are returning to manageable levels, particularly in Europe, where a mild winter and demand destruction have helped to cool markets,” Sadamori says. “China is the great unknown in 2023 – if global LNG demand returns to pre-crisis levels, that will only intensify competition on global markets and inevitably push prices up again.”
Global LNG demand grew in 2022, but the IEA’s Q1 2023 gas report found that the 5.5% increase in supply was “relatively modest.”
Daniel Gent, energy and sustainability manager for sustainable shipping company, UECC, says demand will continue to drive growth in the coming years.
“What has been very interesting to me is the relatively low, stable LNG price of recent weeks,” Gent says. “The supply cut that occurred over the turbulent past 12 months has not been fully replaced – LNG imports into Europe are nowhere near the absent Russian volumes – and yet we see a ‘reasonable’ gas price.”
“I think that multi-fuel consumers, including maritime users, moved away from gas en masse and this continued demand collapse is helping the bear market,” Gent continues. “The forward curve is a little more bullish, however, which would indicate buyers are coming back to the gas market – certainly shipping companies are – and there are questions to be answered as to whether the LNG supply side has been bolstered enough to withstand this demand uptick.”
In regard to European market prospects, Gent says the Mediterranean region is “interesting” and one that “would have developed much further by now were it not for the war in Ukraine.”
“Spain is in a great position to develop infrastructure, it has the molecules and it has a very good customer base in the form of passenger liner services,” Gent explains. “There are a number of Greek suppliers who are keen to establish themselves but have temporarily shelved their plans until we have greater market clarity.”
Looking ahead, Gent says that even if LNG is considered a transitional fuel as regions move away from fossil fuels and favour growth in renewables, there should still be impetus to build LNG infrastructure.
“Even if the LNG molecules themselves are transitional, the infrastructure can be utilised to store and deliver the next phase of fuels, such as synthetic LNG and liquefied biomethane,” Gent concludes.
Courtesy of Georgia Lewis
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