LNG Export Research Articles

Comments: Upset in Energy Interdependence Rocks the World

What may have been a sense of uneasy security in countries around the world that relied on imported oil and gas has been shaken off. Russia’s invasion of Ukraine, and its role in supplying oil and natural gas to the EU, highlights just how quickly the sourcing of fuel can or must change because of the physical disruption of production, operations, and transportation, or because of sanctions or a country’s own concerns about energy security. The resultant market volatility is being felt around the world. The European Commission published plans on 8 March to cut Russian natural gas imports by two-thirds this year and end its reliance on Russian supplies “well before 2030.” About 40%, or 150–190 Bcm, of the gas supplied to the EU’s 27 countries is provided by Russia. EU Climate Policy Chief Frans Timmermans said, “The answer to this concern for our security lies in renewable energy and diversification of supply.” However, renewable energy sources are nowhere near the capacity needed to fill the supply gap and won’t be for many years to come. Diversification of supply is the most feasible alternative now. The commission said the US, Qatar, and others may be able to provide 60 Bcm of gas and LNG, equivalent to about a third of the Russian supply. Since December, US LNG exports have been heading to Europe to help refill its natural gas storage, which has been at its lowest level in at least 10 years. Storage injections in the summer were limited because of the high volume of LNG exports to Asia, high wholesale gas prices, and reduced supplies from Russia. US LNG exports in March were expected to reach about 8.84 Bcm (projection as of 16 March), exceeding a record 8.6 Bcm in January 2022. Qatar’s Energy Minister Saad al-Kaabi said in February that his country’s LNG volumes are committed in long-term contracts mostly to Asian buyers, adding that only 10–15% of the volumes may be divertible to Europe.

Structural power in Russia's gas sector: The commoditisation of the gas market and the case of Novatek

Over the last 20 years, Russia has taken several initiatives in order to become an LNG producer of global relevance. Failing to achieve this status for long while being instead a natural gas producer and exporter, Moscow has undertaken an ambitious reform process of the domestic gas system. Challenged by international market developments, including the commoditisation of gas and the transformation of historical features of the international gas trade, Russia has allowed new companies to surge and fulfil Kremlin’s strategic goals. By the means of supporting productive and technologic innovations through a number of policy initiatives, Moscow has altered historical structures of the gas system, extending unparalleled fiscal and institutional measures in the Russian energy context. Therefore, the traditional primacy of state-owned Gazprom is increasingly challenged and a new private company, Novatek, has emerged as the main advocate of Russia’s LNG strategy. Through the application of production and structural power concepts, the article provides insights on the power dynamics over the configuration of country’s LNG production and export policies, both between the Russian state and the gas companies, and between the same companies. From this, Novatek rises as the institutional winner and legitimate promoter of country’s interests. Also, it favours company’s interests in other structures, like in the Russian gas export policy. These findings could be relevant to the study of state and market relations in other LNG producers, in particular those countries where the state has a long history of involvement in energy policy and strategy formulation.

Perspectives and strategies for LNG expansion in Qatar: A SWOT analysis

During the 2010s, the global LNG markets, production, and infrastructure went through a remarkable evolution. Countries like Australia, the US, and Russia have registered records of sanctioned LNG capacity to export all over the world, pushing Qatar to reconsider of expanding its LNG production in the market. Nevertheless, an unexpected blow came in early 2020 with the COVID19 pandemic, which resulted in a demand shock in the LNG market. With the LNG exporters locked in a boom and bust cycle for the next years, it is time to make an in-depth SWOT analysis of the LNG market, exporters, importers, production, and capacity. We analyze challenges and opportunities the exporters would likely face in their future expansion projects. This analysis identifies the internal and external factors playing a crucial role in expanding LNG infrastructure to formulate strategies from Qatar's perspectives to strengthen its position in the market. The paper concludes that, in the short term, even under the heightened competition of new LNG oversupply, the COVID-19 economic shock and collapsing demand reinforced some trends and threats, but the LNG market would recover faster than other energy sectors. Qatar will continue to be a reliable, responsive, and low-cost supplier due to its strengths such as large and efficient production capacity, flexible and agile logistics network, long-term market relations, and leadership position in the market. In the long-term, it is expected that the crisis may act to balance out the market in supply and demand terms, generating new opportunities and leading from the punctual but significant effects of the pandemic to a regrowth of the market, with reaping benefits for Qatar.

Global LNG market: supply-demand and economic analysis

The transition to clean and low-carbon energy is an irresistible trend globally that drives the scale of trade in the global LNG market to grow continuously. The paper reviews the global LNG trade in 2020 and forecasts the future LNG supply and demand. On this basis, the costs in segments of a LNG project are analysed from the perspective of the LNG industry chain. The feasibility of export from LNG projects and the preferred target markets are determined by calculating the economic index of projects. It is concluded that the possibility of future rebound in oil prices and the demand growth in the incremental market in emerging Asian countries are most likely to determine the capacity scales of new LNG projects around the world and contribute to a dynamic balance in the LNG market in the medium- and longterm. The costs in different segments of the LNG industry chain vary greatly with the availability of resources and markets. The economics of LNG export depend on the demand for LNG imports in end markets, the cost plus in different segments of the industrial chain, and the affordability of end consumers. Through the cost and economic analysis on typical LNG Projects, Qatar is found still the most economical and highly profitable country in the global LNG export market nowadays. Unsatisfactory economic performance is a common reason for delayed investments in many large LNG projects in Australia and other countries.

Energy security issues in US and EU foreign policy: comparative analysis

Energy resources are becoming an increasingly politicized commodity, which at the same time retains special technical and economic characteristics, which complicates the work of the foreign policy leadership. The authors, using a comparative method, conduct a study of the relationship between energy and foreign policy in the EU and the USA through the prism of different cognitive structures used by subjects to assess the landscape of global energy. On this conceptual basis, the authors explore the evolution of the relationship between energy and foreign policy in the EU and the United States: to what extent energy is a useful tool of foreign policy, and, conversely, how deeply the goals of energy policy are embedded in foreign policy. By making such a comparison, the authors identify differences and potential similarities between the EU and the US in this area. Thus, comparing the approaches of the USA and the EU, one can see a tendency towards their convergence. Despite the significant difference in the energy landscape of the EU and the United States, Brussels and Washington agreed that they included a common vision of the global energy architecture in their foreign policy. The use of energy as a political tool, at least in rhetoric, was condemned by both sides. Nevertheless, at the national level, energy issues in the EU are often determined by the foreign policy considerations of a particular country. It is also worth remembering that LNG exports from the United States to Europe are considered to a certain extent as a means of increasing competition for Russian natural gas, as a way to provide US allies with an alternative and help them reduce dependence on Russia, sometimes even as an energy weapon, but in any case as a very effective foreign policy tool.

Disruption of maritime trade chokepoints and the global LNG trade: An agent-based modeling approach

Maritime chokepoints are key corridors in the global supply chain because they connect waterbodies, countries, and regions worldwide with few alternative routes. In case of closure (as the blockade of the Suez Canal in March 2021), the energy supply is substantially affected. Therefore, clear and safe passage through these chokepoints plays a critical role in energy transportation, global economy, and sustainable development. This study uses Agent-Based Modeling to develop an LNG market model and simulate the disruption of three main chokepoints: Panama Canal, Suez Canal / Bab el-Mandeb Strait, and Malacca Strait. After validating the computational model with the actual historical data, the model shows the chokepoints blockade effects on changing the LNG trade and exports from suppliers. The implications are immediate. In general, countries should work together to secure maritime trade routes, retain clear and safe maritime corridors, establish potential passages as alternatives to these chokepoints where possible, and decentralize LNG plants to have access from or to different maritime routes. Each importer should integrate their gas markets with pipelines networks, search for domestic gas resources, and diversify energy sources to decline energy dependency and gas imports from remote producing areas.

Intellectual Capital for Exploration is Running on Fumes

The Federal Government’s acknowledgement of ever encroaching east coast gas shortages, compounded with a looming supply squeeze confronting future LNG export delivery and the scarcity of skilled explorationists to reverse the decline, has produced a near-perfect storm for the Australian hydrocarbon industry.

Liquefied Natural Gas Infrastructure and Prospects for the Use of LNG in the Baltic States and Finland

Abstract In the early 2010s, only 23 countries had access to the liquefied natural gas (hereinafter – LNG). Import terminals, despite attractive short-term economics, took long time to build, and rigid supply contracts made truly global use of LNG rather complicated. Concerns about geo-political risks also stunted demand growth from existing supply sources, even when new LNG export routes and sources became available. Current natural gas market is very different, both in terms of market participants and accessibility and diversity of services. In 2019, the number of LNG importing countries reached 43. Rising competition among suppliers and increasing liquidity of markets themselves created favourable conditions to diversify contract duration, size, and flexibility. In addition, development of floating storage and regasification unit (hereinafter – FSRU) technology provided LNG suppliers with a quick response option to sudden demand fluctuations in regional and local natural gas markets [1]. Moreover, LNG is one of the major options not only for bringing the natural gas to regions where its pipeline supply infrastructure is historically absent, limited or underdeveloped, but also for diversification of the natural gas supply routes and sources in regions with sufficient state of pipeline delivery possibilities. And it concerns smaller natural gas markets, like the Baltic States and Finland as well. Accordingly, prospects for use of LNG there in both mid and long-term perspective must be carefully evaluated, especially in regards to emerging bunkering business in the Baltic Sea aquatory and energy transition in Finland, replacing coal base-load generation with other, more sustainable and environmentally friendly alternatives.

АНАЛИЗ ТЕНДЕНЦИЙ РЫНКА СПГ И ПЕРСПЕКТИВ РЕАЛИЗАЦИИ РОССИЙСКИХ АРКТИЧЕСКИХ СПГ-ПРОЕКТОВ.

Currently, natural gas is considered by most countries as the main source of energy, since it is the cleanest of all hydrocarbon fuels. So, the countries of the European Union have already announced their intention to completely abandon coal, in the production of electricity, in favor of natural gas by 2030. A similar policy is being pursued by the countries of the Asia-Pacific region, although they do not specify any specific deadlines. At the same time, natural gas is transported in two ways — using a pipeline and in liquefied form. The main advantage of the second method is that after liquefaction, the gas can be delivered to any point of the planet where there is a demand for it. Currently, the growth rate of the liquefied natural gas market is such that in 15–20 years it will not only catch up with the pipeline market, but also surpass it The paper identifies the key producers and exporters of liquefied natural gas, as well as assesses their potential opportunities in terms of increasing the volume of natural gas production and LNG production. The analysis showed that at the beginning of 2021, the main LNG exporters are Australia, Algeria, Indonesia, Malaysia, Qatar, Nigeria, Russia and the United States. At the same time, Qatar, Russia and the United States have real opportunities to increase export volumes. Australia is also able to increase production volumes, as it has reserves and spare production capacity, but due to the significantly increased domestic demand for LNG, it is likely that it will not be able to do this in the near future.

RUSSIAN ENERGY STRATEGIES IN THE NATURAL GAS MARKET FOR ENERGY SECURITY

The global natural gas market is one of the fastest growing energy markets. Russia is the second largest natural gas producer，and natural gas is its important strategic resource. As one of the main sectors of the Russian economy, natural gas plays a key role in the country's financial revenue and trade balance. In addition, it is also an important part of Russia's foreign policy. The structure and system of Russia's natural gas industry are inconsistent with its future development. We assess the natural gas security risks facing Russia by using HHI index, which takes into account the concentration of Russian natural gas exports. By calculating the HHI index, we found that Russia's natural gas export risk level differs considerably over different years. Russia is making efforts to promote the reform of the industry, and the government has constantly revised the draft energy strategy, to propose the latest derection for the long-term development of the natural gas industry. Russian gas strategy is to diversify the ways, directions and conditions of supplies to the world's major energy markets. Russia's layout of LNG export can helps boost trade growth, and promote the diversification of its natural gas exports.Keywords: Russia, Natural Gas, Energy Strategy, Energy SecurityJEL Classifications: Q4, Q40, Q48, C8DOI: https://doi.org/10.32479/ijeep.10755

Внешнеполитические приоритеты Катара в эпоху эволюции мировых энергетических рынков

Using elements of the ‘small state’ theory, the article examines relations between Qatar’s foreign policy priorities and existing challenges to Doha’s presence at the natural gas markets caused by the impact of the US shale revolution, beginning of the global energy transition, and COVID 19 pandemic. These factors shifted the critical emphasis in the concept of the Persian Gulf energy security. The oversupply of gas that has been existing in the markets since 2019 and the emergence of new leaders in the list of leading LNG exporting countries in recent years significantly changed the situation in the markets in favor of consumers, who can now diversify their sources of supply. Under these circumstances, the sustainability of gas exports from the Gulf countries is no longer a factor of supply security, but an element of demand security: while LNG consumers have access to alternative suppliers, it is Qatar that has to fight for its place in the market, ensuring a stable demand for its main export product. This, in turn, forces Doha to re-adjust its relations with both the consumer countries and main rivals at the LNG market. Under the new circumstances, Qatar’s main challenge remains unchanged: it has to maintain sufficient financial revenues received from the LNG exports to ensure its more active and independent foreign policy that differs it from other so-called “small states”. Yet, to achieve this, Qatar is following the traditional strategy of small states: it hedges its risks through forming multilevel coalitions and alliances with both consumers and exporters of natural gas.

북미 LNG 수출이 국제 천연가스 현물시장 間 가격 형성에 미친 영향 연구

북미 LNG 수출이 국제 천연가스 현물시장 間 가격 형성에 미친 영향 연구

Factors of competitiveness of LNG export projects

As a result of the development of liquefaction, storage, transportation and regasification technologies, the attractiveness of LNG projects is steadily growing — in some cases, such projects are becoming more competitive than traditional pipeline solutions. The range of solutions for natural gas liquefaction projects is very wide, but low-tonnage LNG provides greater mobility and high speed of project implementation, cause of the usage of the simple low-efficiency technologies. Medium-capacity natural gas liquefaction plants can be built in environment where there are not enough resources to create a large-capacity project, and enable the usage of relatively small and remote fields, including off shore areas. For Russia, an important advantage of medium-tonnage technologies is that they can be developed in a relatively short time. The positive experience of government support for LNG exports in Canada is noteworthy. The government of this state strives to create conditions for environmentally responsible energy production and use, while ensuring the growth of the Canadian economy, as well as the availability of reliable and competitive energy sources and the protection of energy infrastructure. As for the portfolio of orders for Russian projects for natural gas liquefaction, for example, at present, in the Yamal-LNG project, Russian orders account for only 30 %, and the goal is at least 70 %. To achieve this goal, government support is required: concessional lending and tax incentives. For LNG production in the Arctic zone of the Russian Federation, with the support of the state Corporation Rosatom, a bench-testing base for import-substituting equipment is being created in the Nizhny Novgorod region. Government support for LNG projects should also include improving the regulatory framework. Russia is taking an important step towards developing its hydrocarbon reserves in the Arctic. Special attention should be paid to the measures of state support that are provided to exporters in the context of the pandemic, including in the field of LNG sales, in particular, ensuring sustainable lending to the real sector of the economy with the provision of state guarantees and subsidies.

Natural gas infrastructure development in North America under integrated markets

The exploitation of low-cost shale gas in the Marcellus Formation, the deregulation initiatives in the U.S. and Mexico, and the emergence of natural gas as a bridging fuel to a low-carbon economy has fueled the growth of North American natural gas production, which is projected to keep growing in the mid-term to support the increasing LNG exports. Greater introduction of renewables and deeper electrification suppress both supply and demand for natural gas in the long-term. The long lead times of pipeline operation and field exploitation render the timing of natural gas abatement critical to natural gas infrastructure stakeholders. Full integration of the U.S., Canadian, and Mexican natural gas markets implies that the abatement trajectories of the three countries are tightly linked. This paper studies the development of the integrated North American natural gas markets and infrastructure under different assumptions on resource availability, technological progress, and global crude oil prices. We quantify the impact of each scenario by using the North American Natural Gas Model. Our analysis shows that cross-border U.S.-Mexico trade is more resilient under all three shocks compared to U.S.-Canada trade. Increasing Mexican production could drive the growth of the domestic Mexican market instead of reducing U.S.-Mexico trade.

Dynamics of Australia's LNG export performance: A modified constant market shares analysis

Abstract With continuous growth, the global LNG market is becoming increasingly competitive over time, and Australia is at the forefront. This paper makes the first attempt to analyse the dynamics of Australia's LNG export performance, using an improved Constant Market Share (CMS) model and UN Comtrade LNG trade data in four sub-periods spanning 1989 to 2017. It reveals that apart from the aggregate unfavourable Market Effect and favourable Adaptation Effect, the Competitiveness Effect has contributed the most to Australia's LNG export performance over the past three decades, particularly in Australia's existing LNG markets. A further breakdown of Australia's Competitiveness Effect quantifies the direct bilateral competition between Australia and its rivals. The results reveal that Australian LNG export performance faces challenges in the future. This study suggests that Australian LNG exporters must keep their pace with the new players, expand existing markets, and prepare for the impacts of changes in the pricing mechanism.

THE TRUMP ADMINISTRATION’S APPROACH TO ENERGY SECURITY IN POLAND AND THE BALTIC STATES

The subject of this paper encompasses US policy towards Poland and the Baltic States regarding energy security during Donald Trump’s presidency. It is discernible that vast domestic energy resources have created an opportunity for the US to project more power to these countries, and the surrounding region. We argue that Trump and his administration’s perceptions have served as an intervening variable in that opportunity assessment, in accordance with the neoclassical realist theory. The main research question addressed in this paper is whether US has used that opportunity to contribute to energy security in countries it has traditionally deemed as allies. Two aspects of US approach to energy security of the designated countries are taken into consideration: liquified natural gas exports and support for the Three Seas Initiative. The way Trump presented his policy and its results in his public statements has also been considered in this paper. The article will proceed as follows. The first subsection of the paper represents a summary of energy security challenges in Poland and the Baltic States. The second subsection is dedicated to the opportunity for the US to project energy power and to Trump’s perceptions relevant for the opportunity assessment. The third subsection deals with American LNG exports to these countries as a possible way for contributing to energy security in Poland and the Baltic States. The last part of the paper addresses the Three Seas Initiative and US approach to this platform.

Medium- and Long-Term Trends in the Development of the World Economy

The article deals with long-term trends in the world economy and international trade, new challenges for global development, including digitalization and servicification of the economy, trade wars and increasing geopolitical tensions in the world. Also the medium-term prospects of world economic and commodity markets situation are analyzed, as well as specific economic developments in the largest countries and groupings – the USA, EU, China and India. The unprecedented scale of trade and economic confrontation between the United States and China has significantly increased uncertainty in the global market and provoked an explosive growth of trade protectionism, destabilized the foundations of the existing world economic order. Long-term structural shifts in international trade are associated with an increase in the share of services and expanding range of tradable services due to digitization, in the world energy market – with the US becoming one of the largest net exporters of energy and the formation of a highly competitive global gas market due to the explosive growth of LNG exports and the diversification of its suppliers. Almost all future scenarios are dominated by downside risks and strategic uncertainties, which increases the demand for multi-vector policy and diversification in foreign economic activity.

Super cycles in natural gas prices and their impact on Latin American energy and environmental policies

There was an upward trend in energy commodity prices since 2000, but with the surge in supply coming from unconventional oil and gas resources in North America, the trend in natural gas prices has become downward in recent years. However, the exploitation of these resources is generating public concerns due to the possible adverse environmental impacts of using hydraulic fracturing and other techniques on underground water. The purpose of this paper is to address the following questions: are there super cycles in natural gas prices? What are the environmental consequences in Latin America of the exploitation of unconventional gas given the cyclical behavior of gas prices? How are the governments in the region implementing energy and environmental policies to regulate unconventional shale gas production? With the last peak occurring in 2006, we identified three super cycles in natural gas prices, and it is predicted to observe a new super cycle in the 2020s. Our analysis indicates that the unstable political situation, the institutional weakness, the governmental intervention through asset nationalization, high capital expenditures to develop LNG export projects and to explore shale resources, as well as the pre-salt discoveries in Brazil make uncertain that the shale gas boom achieve a significant impact in Latin America during the coming gas-price super cycle.

A Strategic Perspective on Competition between Pipeline Gas and LNG

Global gas markets feature two types of suppliers: piped gas and LNG exporters. Pipelines have a high degree of “asset specificity” : once built, they are physically bound to a particular route. LNG is transported by tanker, with a choice of export markets. Put simply: LNG is mobile, pipelines are not. This paper uses game-theoretic modelling to show how its commitment to serving a single market confers a strategic advantage on piped gas. By “overinvesting” in its own market, a pipeline exporter can induce LNG rivals to shift sales to their other markets. The model helps understand competition between Russian piped gas and Qatari LNG. It shows how Russia’s dependence on Europe can be good news for gas buyers, why these nonetheless strongly benefit from diversifying into LNG imports, and how the Herfindahl index of imports can mismeasure “supply security”. The paper also discusses Russia’s evolving gas export strategy, including gas deals with China.

Towards a worldwide integrated market? New evidence on the dynamics of U.S., European and Asian natural gas prices

Has the integration of European, North American and Asian natural gas markets been fostered over the last few years by growing LNG export capacities and an increasing market share of spot transactions? This is the key question that this article sets out to answer. For this purpose, we develop bivariate error correction models with structural breaks and asymmetric responses among gas references prices, oil prices, and coal prices. We use daily prices of all reference prices spanning from January 12, 2004, to January 12, 2018, for the North American, Asian and European areas. We show that if European and U.S. gas prices are co-integrated when multiple breaks are allowed, their respective markets cannot be considered integrated. However, our results show that the degree of interdependence between European and American prices is increasing, whereas the degree of interdependence between gas and crude oil prices is decreasing. More surprisingly, we also highlight that reversions to long-term equilibria both between the Henry Hub (HH) and the National Balancing Point (NBP) and between the HH and the Japan Korean Marker (JKM) are highly asymmetric, a pattern that could be intuitively interpreted as the consequence of market arbitrage strategies by exporting countries in a context of oversupplied markets.