This week hundreds of industry insiders are heading to Amsterdam for “Europe's largest midstream gas & LNG event”, the 25th annual Flame Conference. The setting for the summit is an apt one, as the Netherlands is a sort of poster child for the current state of the liquefied natural gas industry throughout Europe. At one time the Netherlands was the largest supplier of natural gas in all of Europe. Now production is in serious decline as the nation becomes more and more dependent on natural gas imported from other countries.
The transition from energy autonomy to dependence on imports from places like Russia (which already supplies a massive amount of the European Union’s fuel demand at approximately 40 percent), northern Africa, Qatar and the United States embodied by the Netherlands is also true for the European continent as a whole. This trend is not only set to continue, but to worsen.
The Netherlands is on track to become a net importer of natural gas. What was once Europe’s largest natural gas field, the Netherlands’ Groningen field, has already been diminished considerably and will be shut down completely by 2030 as part of the Dutch government's efforts to quell earthquakes caused by gas exploration in the area.
Even after a relatively mild winter, Bloomberg reports that “European LNG imports more than doubled in the first quarter [...] demonstrating a ‘genuine underlying demand’ according to Alastair Maxwell, chief financial officer of LNG tanker owner GasLog Ltd.” Maxwell went on to explain to Bloomberg reporters that, “while buyers took advantage of the lower prices to bring in more cargoes, declines in the region’s production were also behind the increases.”
So far, as European natural gas production has been in severe decline, low natural gas prices--thanks in large part to a global supply glut--has been the continent’s saving grace. As we head into the summer, however, demand for natural gas in Asia is set to keep growing, and gas prices will likely grow accordingly. Related: The Battle For Control Over Iraq’s Oil
In the meantime, the European Union’s growing dependence on Russia has created a politically fraught dynamic between Europe, Moscow, and Washington. The United States has urged the European Union to ease their dependence on Russian oil. “The U.S. says that dependency is dangerous and is urging the EU to build more terminals to ship in gas from its shale boom to bolster the bloc’s efforts at diversification,” reports Bloomberg.
In fact, just this week United States energy secretary Rick Perry announced that on Monday in Brussels he signed two export orders for liquefied natural gas as part of an agreement that will raise the United States’ export capacity to Europe to Europe to 112 billion cubic meters per year by 2020, more than double the current annual amount. In a rather hyperbolic address to reporters in Brussels Perry compared the introduction of more U.S. natural gas into European markets to U.S. troops during World War II, saying that “the United States is again delivering a form of freedom to the European continent [...] and rather than in the form of young American soldiers, it’s in the form of liquefied natural gas.”
This week’s liquefied natural gas export orders come on the tails of a joint statement pledging to build up strategic energy cooperation between the EU and the U.S., released last year by European Commission President Jean-Claude Juncker and United States President Donald Trump. The initiative to import more LNG from the U.S. realized this week was already established in the statement released last July. “The European Union wants to import more liquefied natural gas (LNG) from the United States to diversify its energy supply,” stated the press release.
By Haley Zaremba for Oilprice.com
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