By Rhod Mackenzie
The global gas trade is growing, with LNG occupying an increasing market share. The alignment of countries that produce and export LNG, as well as its main consumers, is constantly changing
The World trade in liquefied natural gas in 2022 grew in physical volume by 6.8%, to 401.5 million tons, follows from the latest annual report of the International Gas Union (IGU World LNG Report 2023). But the value of the supply of this energy resource, according to a previously published estimate by the International Energy Agency (IEA), doubled, reaching $ 450 billion. The reason for this was the colossal rise in prices that followed as a result of the sanctions war against Russia, one of the leading suppliers of gas to the world market. The average level of prices for international LNG supplies in the last turbulent year, as can be easily calculated by comparing the figures of the IGU and the IEA, jumped 1.9 times - from 598 to 1120 dollars per ton.
Russian pipeline gas supplies to the European market became a victim of the confrontation between Russia and Europe: they almost halved in 2022 - from 167 to 86 billion cubic meters (including the UK and Turkey). The resulting “hole” was plugged with liquefied gas, at the same time noticeably, by 15%, reducing gas consumption in general (albeit at the cost of sensitive deindustrialization).
Today, natural gas consumption in the world is just under 4 trillion cubic meters (or 2.9 trillion tons) per year. Of these, more than 1.2 trillion cubic meters is mediated by international trade. Thus, although pipeline gas continues to dominate cross-border supplies, the share of LNG is growing rapidly, reaching already 45% last year (and 14% of global consumption).
The "clubs" of LNG producers and consumers are also steadily expanding. Last year, Mozambique became the 20th LNG exporter, and the number of importers reached 48, with Germany and the Philippines added.
Russians and Papuans - do not win
The alignment of forces among exporters and the capacity of importing markets have also changed. The most aggressive player in the global liquefied natural gas market after 2015 is the United States. The result of the American shale revolution was an excess of cheap gas, which was decided to be liquefied and exported. Over the past seven years, the Americans have built seven large-tonnage gas liquefaction plants - their capacity has grown from zero to 88 million tons per year - this is exactly half of the increase in global gas liquefaction production capacity in 2016-2022.
Last year, the United States displaced Qatar as the third largest exporter, delivering 80.5 million tons to world markets - 10.5 million tons more than in 2021, and almost catching up with the leader - Australia (80.9 million tons). Russia retained its fourth position in the list of the largest LNG exporters, having increased supplies from 29.6 to 33 million tons. Our country, despite the SVO and the sanctions war, has launched a new, albeit small (1.5 million tons per year) plant, Gazprom LNG Portovaya. In addition, the Yamal LNG plant built by an international consortium led by Novatek on the Yamal Peninsula continued to increase output. At the end of 2022, Yamal LNG shipped 21 million tons of liquefied natural gas (about 5% of global production), with a design capacity of 17.4 million tons of its four process lines.
Russia, together with Papua New Guinea, holds the record for the level of utilization of its LNG production capacities. According to the IGU report, in both countries it is 120%, with a global average of 89%. The highly efficient operation of available capacities allows Russia to outpace Malaysia in terms of LNG production and export. The latter supplies 27.3 million tons to world markets (5th place in the world) with available liquefaction capacities of 31.1 million tons (4th place).
USA wins again
Significant progress took place last year in the "club" of LNG importers. For most of the year, adhering to a maximalist policy of zero tolerance for COVID-19, China maintained lockdowns and was forced to reduce gas demand, which was reflected in a reduction in LNG supplies to this country by 15.2 million tons, to 63.7 million. As a result, Japan regained selected by China a year earlier as the largest buyer of LNG in the world, although the volume of imports was slightly lower than in 2021 - 73.6 against 74.9 million tons. South Korea remained the third largest buyer, importing 47.1 million tons of LNG (+0.6 million tons by 2021).
But below in the list of buyers there was a serious shake-up. The major European gas consuming countries have become troublemakers. France moved up from seventh to fourth place, increasing LNG imports 2.1 times to 25.6 million tons. Spain moved from the sixth to the fifth step, increasing supplies by 53%, to 21.1 million tons. The sixth and seventh positions in terms of LNG imports were occupied by non-Europeans - Taiwan and India (20.3 million tons and 19.4 million tons, respectively).
In general, Europe (EU-27, the UK and Turkey) increased LNG imports in 2022 by 50.4 million tons at once, up to 126.6 million tons, thus covering 85% of the “shortage” of Russian pipeline gas. Moreover, almost nine-tenths of the increase (43.9 million tons of LNG) was accounted for by six countries - France, Great Britain, Spain, the Netherlands, Belgium and Italy.
The main beneficiary of this forced surge in European LNG demand has been the United States, which doubled supplies to the Old World last year to 55.2 million tons, increasing its share of the European LNG market from 29% to 44% in one year. %. Even if we proceed from the average world prices of the last year (in fact, in Europe they were noticeably higher than in Asia, motivating even a number of Asian buyers to re-export small volumes of LNG to Europe), then America earned 62 billion last year from the supply of liquefied gas to the Old World. dollars.
Import and replace here
Last year, the United States dominated the top five largest European LNG markets - France, Spain, the UK, the Netherlands and Turkey. In Italy, the United States is second after Qatar, in Belgium it is third after Qatar and Russia.
Our country ranks third in LNG supplies to Europe - after the USA and Qatar - having increased supplies to the continent by 2 million tons last year, to 14.8 million, which, however, due to the sharp expansion of the market, did not allow us to hold positions: our the share of the European LNG market in 2022 decreased from 17% to 12%.
In Asia, Russia is the third player in the Japanese LNG market after Australia and Malaysia (7.05 million tons, a market share of 9.6%), the fourth, after Australia, Qatar and Malaysia, in the Chinese market (6.34 million tons, 10% of the market), sixth in Taiwan and seventh in Korea.
The nearest plans for the development of the domestic industry of large-capacity liquefaction are quite ambitious. According to Novatek, at the end of this year, the first batch of LNG should be shipped from the new, already fourth in Russia, Arctic LNG-2 LNG plant on the Gydan Peninsula. Once this facility reaches its full capacity of 19.8 million tons, which is scheduled to take place in 2026, Russian export capacity will increase to 53 million tons, and our share of the global LNG market will increase from the current 8% to 10%.
But it is even more important to note the unfolding process of import substitution in the industry - both in the development of its own main equipment for LNG plants, and in the field of establishing original technologies for large-tonnage liquefaction. A month ago, NovaTEK patented its own technology for liquefying natural gas based on mixed refrigerants "Arctic Mix". The latter was developed for the implementation of large-capacity projects based on gravity-type foundations with a capacity of one production line of more than 6 million tons per year.
This is article originally appeared in Russian at expert.ru