LNG

The UK Isle of Grain LNG import terminal, the largest in Europe and located on the Medway River in the southeast English county of Kent, reported a 60 percent surge in cargo deliveries in the past year and when more gas was supplied to the UK and the European Union.

European and Asian wholesale gas markets and LNG values declined for a third week with the European Union benchmark being one-and-a-half times more than where it was a year ago, five months before the war in Ukraine and when Nord Stream II was still a possibility.

Russian natural gas company Gazprom said it produced 300.8 billion cubic metres of gas from January through September 15, a drop of 15.9 percent from last year and expected exports to the European Union would be down by 50 Bcm by year-end.

German natural gas supplier Verbundnetz Gas AG (VNG), based in the eastern city of Leipzig, has become the second large Russian gas buyer to be approved for a Berlin Government bail-out to stay afloat after LNG buyer Uniper received government funds in return for a stake.

The Russian government said the Asia-Pacific region would likely largely replace Europe as a recipient of natural gas and petroleum in the wake of Western sanctions over Ukraine while European spot natural gas prices failed to move significantly higher in the wake of expected events.

Fitch Ratings, the New York-based credit ratings agency and financial services company, has just published a report analysing the European Union’s efforts to mitigate the worst effects on gas markets of a cut-off of Russian imports and for their replacement with LNG and other types of energy.

Shell Chief Executive Ben van Beurden said there was no swift solution to Europe’s current energy crisis and the region would face significant challenges in meeting demand for several winters to come.

“I do not think this crisis is going to be limited to just one winter,” Ben van Beurden said at the Offshore Northern Seas (ONS) Foundation 2022 conference in Stavanger, Norway.

“It may well be that we have a number of winters where we have to somehow find solutions through efficiency savings, through rationing, and through a very quick build out of alternative gas imports or hopefully alternative energy sources,” said the Shell CEO.

His comments come after European natural gas and power futures contracts soared again to record highs and LNG cargoes are now priced at more than $300 million each.

Prices have surged since Russia’s invasion of Ukraine in February 2022, though they were already moving higher amid fears of gas shortages after the European Union’s halting of the start-up of the Gazprom-led Nord Stream II gas pipeline from Russia about four months before the Ukraine events.

About-turn

Analysts said that Van Beurden’s statement was a timely intervention though he has been among the majority group of energy CEOs, bankers and political leaders who have jumped on the net-zero bandwagon without making sure or emphasizing that sufficient oil and gas would have to be available in the years ahead before an energy transition is completed.

Even though the EU aims to reduce gas imports from Russia by two-thirds within a year and be virtually independent in five years, the 27-nation bloc is still reliant on Russian supplies in the near term.

“If there was no Russian gas supply at all life would be very hard,” stated Van Beurden whose company was shut Russian operations, including pulling out of the Sakhalin II LNG export plant in the Russian Far East.

Van Beurden said people should be mindful and responsible when it comes to the energy crisis and to understand that to believe that it could easily be solved was a “fantasy”.

The Shell CEO told the Norwegian conference that energy rationing may be needed for a number of years, underlining the scale of the challenge facing global economies.

Musk warning

Another speaker at the Norwegian conference was Elon Musk, the billionaire head of Tesla, the US multinational automotive and clean energy company headquartered in Austin, Texas.

Musk said “civilisation will crumble” without oil and gas as he warned the switch to green energy could take several decades.

He stated that the world needed to continue extracting oil and gas while it builds out renewable energy.

Musk declared that the current global energy crisis and the transition to sustainable energy was “one of the biggest challenges the world has ever faced”.

“Realistically I think we need to use oil and gas in the short term, because otherwise civilization will crumble. One of the biggest challenges the world has ever faced is the transition to sustainable energy and to a sustainable economy. That will take some decades to complete,” he explained.

Russian natural gas company Gazprom said exports to countries outside the former Soviet Union were down more than 33 percent year-on-year in the 2022 period from January through July 15 as the Nord Stream I pipeline to Germany was closed for a seventh day of a scheduled 10 days of maintenance.

Equinor, the Norwegian oil and gas company, has initiated a safe shutdown of the Gudrun, Oseberg South and Oseberg East offshore fields in the North Sea because of a strike and prolonged action could lead to a reduction in pipeline natural gas exports to Europe.

The Italian and Spanish LNG importers and natural gas pipeline operators, SNAM and Enagás, have signed an accord on establishing a direct offshore gas pipeline connecting Spain with Italy as a way overcoming the European Union energy crisis worsened by the Ukraine conflict.