Will the US LNG be able to replace Russian gas in Italy?
The United States has pledged to supply 15 billion cubic meters of LNG to the European Union to reduce dependence on Russia. But is the plan feasible? Maybe not. Here because
The United States and the European Union reached an agreement on Friday on supplies of liquefied natural gas (LNG) which should help the Old Continent reduce energy dependence on Russia.
THE TIED HANDS OF EUROPE
It is a considerable dependence – Moscow alone is worth almost 40% of the gas imported by the Union – which represents a risk to European security as well as a limit to the margins for foreign policy action. In fact, if Russia were to stop gas flows, Europe would suffer great industrial and social damage. Furthermore, the Union does not want to sanction the Russian energy sector because it would not be able to replace its hydrocarbons; the refusal to act, however, implies the indirect financing of the Russian aggression against Ukraine: every day European countries buy gas, oil and coal from Moscow for about 1 billion euros.
THE AGREEMENT WITH THE UNITED STATES
For weeks the United States, in order to try to convince the European Union to align itself with the maximum pressure towards Russia, have been looking for supplies of LNG to offset Russian volumes: they have turned to Qatar and Japan , for example.
On March 25, America announced that it will work with its "international partners" to supply 15 billion cubic meters of LNG to the European Union in 2022 and reduce dependence on Russia. Brussels intends to reduce Russian gas imports by two thirds by the end of the year (or 102 billion cubic meters less per year, out of the total 155), also through an increase in LNG imports. Specifically, it wants to buy 50 billion cubic meters of liquefied gas.
“Gas consumption in Europe, about 430 billion cubic meters a year (Italy 76), of which 150 from Moscow, liquid gas promised by Biden to detach 15 billion a year from Russia. The figures speak for themselves ”, wrote Alberto Negri, former foreign special correspondent to the Sole 24 Ore .
In the longer term, Washington has said it is willing to sell an additional 50 billion cubic meters of LNG to Europe per year until 2030, and Brussels to " guarantee stable demand ".
CAN LNG REPLACE RUSSIAN GAS?
The United States has not specified the identity of the "international partners" that should guarantee LNG to the European Union. Beyond the political value of the agreement, its concrete feasibility is very uncertain .
First, the availability of liquefied gas worldwide is limited. And the main exporters, from the United States to Qatar, are unable to increase the supply on the market because their export capacities are almost saturated. To expand them it takes years: from two to three, on average.
Ships loaded with LNG heading elsewhere are also unlikely to be diverted to Europe for two reasons: contractual and market-based. The global trade in liquefied gas takes place within long-term contracts, which generally include clauses that prevent the gas still traveling on LNG carriers from being redirected to other destinations. The fuel should therefore first arrive at its intended destination, and then depart from there to Europe. It is not just a long process, but an unlikely one: large gas consumers (such as Japan) will think first of all to meet their needs, and it is unlikely that they will have cubic meters of fuel left over to share.
The cargoes of LNG released from contracts, then, usually go to Northeast Asia, because the prices of the local market are higher than those in Europe and guarantee greater profits to the sellers. The European energy crisis has changed the context a bit , but it does not seem to be a structural mutation: given the strength of Asian demand and the limited availability of supply, it is likely that competition for LNG supplies will be triggered between Europe and Asia that will push prices even higher.
THE CONTRIBUTION OF THE UNITED STATES
In December 2021, the United States became the largest liquefied gas exporter in the world , surpassing Qatar and Australia. In February 2022, their exports hit a record 13.3 billion cubic feet per day, and more than that they cannot rise.
America has seven export terminals. Once the most recent – Calcasieu Pass, Louisiana – is fully operational by the end of the year, the country's export capacity will reach 13.9 billion cubic feet.
Beyond the plant deficit, which cannot be resolved immediately, Washington will not be able to heat Europe with its gas for another contextual reason. In the United States, political will and direction cannot completely impose themselves on the logic of the market and on private initiative. As a result, US tankers may prefer to sail the Pacific Ocean to Asia rather than the Atlantic.
THE CONTRIBUTION OF CHINA?
China is the largest importer of LNG in the world. Yet, in recent days, it has resold in Europe three shipments purchased in the United States. The long contracts that Chinese companies have entered into with American suppliers in recent months, guaranteeing Beijing volumes in excess of its internal needs, could make the country a powerhouse in the exchanges of liquefied gas on the markets. It is still too early to be certain, however. To counter this hypothesis is the fact that the Chinese authorities have asked companies to increase gas imports to replenish their stocks, foreseeing possible supply disruptions caused by the war in Ukraine.
WHAT ITALY IS DOING
Even if it were available, the European Union is not able to accept large quantities of LNG because it does not have enough regasification plants, necessary to bring the liquefied gas back into gaseous form to be able to enter it into the network. In addition to being few, European regasifiers are concentrated in a few countries: Spain first of all, then France and Italy.
Ecological Transition Minister Roberto Cingolani said Italy could equip itself with an additional regasification capacity of 24 billion cubic meters in the next twelve to eighteen months. In our country there are three regasification plants (in Panigaglia, Livorno and Porto Viro); the government asked Snam to acquire a regasification vessel and to charter a second one.
Finally, it is possible that the government decides to authorize two new regasifiers: one in Gioia Tauro, in Calabria, built by Sorgenia and Iren; and one in Porto Empedocle, Sicily, by Enel ( here the in-depth analysis of Start Magazine ).
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This is a machine translation from Italian language of a post published on Start Magazine at the URL https://www.startmag.it/energia/gnl-stati-uniti-unione-europea-italia/ on Sat, 26 Mar 2022 06:55:51 +0000.