LNG

Italian oil and gas and LNG project engineering company Saipem, which has extensive global subsea and pipeline expertise, said it reached “new and important project” landmarks by contributing to the start of production of the Payara field, offshore the tiny nation of Guyana in the northeast corner of South America.

The start of production of the offshore oil field is the third project to which Saipem has contributed in the Stabroek Block

The field is operated by a consortium comprising US major ExxonMobil Corp, New York-based Hess Corp., currently being acquired by Chevron Corp., and the Chinese major China National Offshore Oil Corp.

Saipem contributed to the project development by providing engineering, procurement, construction and installation of the underwater facilities.

Saipem installed over 130 kilometres of thick rigid pipelines and risers in about 2,000 metres of water depth.

Guyana reserves

Guyana is among the leading oil and gas reserve holders in Latin America and will be a future large exporter of hydrocarbons along with Argentina, Brazil and Mexico as well as LNG producers Peru and Trinidad and Tobago.

The contract was fully released in 2020 by ExxonMobil Guyana and Saipem said its leading subsea assets such as “FDS2” and “Saipem Constellation” were deployed to carry out the project.

Furthermore, Saipem used its fabrication facility in Georgetown, Guyana, for the fabrication of 48 rigid jumpers, ensuring important local activity and jobs and enhancing sustainable investment in the country.

“Saipem has a consolidated presence in the country, having previously contributed to the development of the two phases of the Liza Project and to the start of the Yellowtail Project,” said the Milan-based company.

Guyana economic boost

The International Energy Agency noted that oil will be required for vehicle transport in the South American and Caribbean region well through 2050.

“Oil production has been rising in Brazil and Guyana, while it is in decline in Venezuela and Mexico,” said the IEA.

“Increased demand and prices for liquefied natural gas has also shone a spotlight on the important role played by LNG exporters such as Trinidad and Tobago and Peru in easing market tightness,” the Paris-based agency added.

Oil currently accounts for 86 percent of energy consumption today in the Latin American transport sector compared with 91 percent globally.

“The share of oil in road transport will decline below 80 percent by 2030 to around 40 percent by 2050,” said the IEA, forecasting that 60 percent of bus and other vehicle transport will come from the “growing use of electricity and bioenergy” vehicles.

“However, rising incomes also prompts an increase in the ownership of appliances and air conditioners, which are the main drivers of electricity consumption growth,” it added.

The International Energy Agency said that the “fraught situation in the Middle East comes 50 years after the oil shock” that led to the founding of the Paris-based IEA itself by the Organisation for Economic Cooperation and Development and the agency has just issued its mixed World Energy Outlook 2023.

The IEA said the instability facing Israel and its neighbours was creating further uncertainty for an “unsettled global economy that is feeling the effects of stubborn inflation and high borrowing costs” in 2023.

The WEO of 2023 highlights include one area of global energy markets, natural gas, that was hit particularly hard by the global energy crisis.

“Natural gas markets have been dominated by fears about security and price spikes after Russia cut supplies to Europe and market balances have remained precarious,” said the IEA.

“But an unprecedented surge in new LNG projects coming online from 2025 is set to add more than 250 billion cubic metres per year of new capacity by 2030, equivalent to around 45 percent of today’s total global LNG supply,” the report explained.

The strong rise in capacity is expected to ease prices and gas supply concerns, though also risks creating a supply glut, given that global gas demand growth has slowed considerably.

“As a result, Russia will have very limited opportunity to expand its customer base. Its share of internationally traded gas, which stood at 30 percent in 2021, is set to drop to half of that by 2030,” the IEA noted.

Variables

The IEA Outlook considered in detail a major variable for energy markets in the coming years. 

“China, which has an outsize influence on global energy trends, is undergoing a major shift as its economy slows and undergoes structural changes,” said the IEA.

“China’s total energy demand is set to peak around the middle of this decade, the report projects, with continued dynamic growth in clean energy putting the country’s fossil fuel demand and emissions into decline,” the agency forecast.

The IEA also forecasts that there are set to be almost 10 times as many electric cars on the road and with renewable energy sources nearing half of the global power mix.

“The phenomenal rise of clean energy technologies such as solar, wind, electric cars and heat pumps is reshaping how we power everything from factories and vehicles to home appliances and heating systems,” it argued.

The WEO 2023 report describes an energy system in 2030 in which clean technologies play a significantly greater role than today. 

It predicts that there will be three times as much investment going into new offshore wind projects than into new coal-fired and gas-fired power plants.

“All of those increases are based only on the current policy settings of governments around the world. If countries deliver on their national energy and climate pledges on time and in full, clean energy progress would move even faster,” it concluded.

The International Energy Agency said the structure of global natural gas markets has been altered by issues raised by the Ukraine conflict and will require still more  closer dialogue between producer and consumer nations to ensure the availability of short-term and long-term pipeline gas and LNG cargo volumes.

The IEA’s annual “Global Gas Security Review” also noted that tensions in the gas markets had eased “significantly” since the beginning of 2023.

The report coincided with the 12th LNG Producer and Consumer Conference in Tokyo involving the leading importers and exporters.

That Tokyo event was co-organised by the IEA and Japan’s Ministry of Economy, Trade and Industry (METI) and has always provided a forum for discussions between natural gas and LNG producer and consumer countries.

The new IEA analysis noted that deeper coordination among market participants remained essential, given momentous shifts in how gas markets function.

The IEA’s latest assessment of market dynamics showed gas markets had moved towards a gradual rebalancing since the start of the year.

High inventories

The report stated that high inventory levels at storage sites in key Asian and European markets provide grounds for “cautious optimism” ahead of the 2023-24 winter heating season in the Northern Hemisphere.

“If injections continue at the average rate observed since mid-April, EU storage sites will reach 90 percent of their working capacity by early August and could be filled close to 100 percent by mid-September,” said the report.

“However, full storage sites are no guarantee against market volatility during the (coming) winter,” the report warned.

The Paris-based body said that there remained “major uncertainties” ahead of the upcoming heating season.

“A cold winter, together with a full halt in Russia piped gas supplies to Europe early in the heating season, could easily renew market tensions,” said the report.

“Fierce competition for gas supplies could also emerge if Northeast Asia experiences colder-than-usual weather and economic growth is stronger than expected in China,” the IEA added.

The security of global gas supplies remains at the forefront of energy policy making, with growing complexity for both the short and long term.

LNG surge

“LNG has become a baseload source of supply for Europe, with its share in total EU demand rising from an average of 12 percent over the 2010s to close to 35 percent in 2022 - similar to the contribution from Russia’s piped gas before the invasion of Ukraine,” said the report.

“Meanwhile, China’s balancing role in global gas markets is set to increase,” stated the IEA.

The report also explained that the “flexibility of gas supply” needed to be reassessed in light of the phase-out of Russian piped gas exports to the European Union.

As producers and consumers engage in closer dialogue to address these dynamics, the new IEA report recommended that they should explore the development of innovative commercial offerings, new procurement mechanisms and cooperative frameworks favouring a more flexible supply of LNG.

The new IEA report also includes a special focus on integrating low-emissions gases into energy systems.

“A new global gas market is taking shape after last year’s crisis. Given this, responsible producers and consumers must reconsider their approaches to supply security and flexibility, cooperating even more closely,” said Keisuke Sadamori, the IEA’s Director of Energy Markets and Security.

“Meaningful efforts are also needed to reduce the carbon footprint of gas supply chains, including through greater use of low-emissions gases,” added Sadamori.

Japanese demand

The report also focused on some individual nations and on the main regions.

In the case of Japan, the leading LNG importer's gas consumption decreased by 12 percent, or 4 billion cubic metres, in the first three months of 2023.

“Gas-fired power generation in the first three months declined by 16 percent (or 15 terawatt hours) according to data from the METI. This was primarily driven by lower electricity consumption, down by 6 percent year-over-year with improving nuclear availability,” said the IEA.

“Japan’s nuclear power output rose by 47 percent (or 12 TWh) in the first half of 2023. In addition, city-gas sales for commercial and industrial use decreased by 3 percent and 12 percent respectively,” added the report.

“For 2023 Japan’s gas demand is forecast to decrease by about 5 percent compared with the previous year,” the IEA stated.

June 26 (LNGJ) - The International Energy Agency, the Paris-based inter-governmental body, has welcomed future West African LNG producer Senegal as a member along with Kenya, the leading economy in East Africa. The IEA said that this brought the number of sub-Saharan African countries in the IEA to three with South Africa already a member.

   “We have worked closely with Senegal since 2019, including providing input into the design of market reforms to enhance governance in the country’s energy sector,” said the IEA. “Kenya is currently working with us on a wide range of topics, including data and statistics,” it added.

The European Commission said it was again pursuing plans to end Russian liquefied natural gas supplies being sold in the European Union and has asked the 27 member states not to sign any new supply contracts.

Pressure on European and global natural gas markets has eased since the beginning of 2023 due to favourable weather conditions and policy actions discouraging gas use, though several factors point to possible supply risks in the fourth quarter.

By the end of first quarter of 2023 European hub and Asian spot liquefied natural gas prices had fallen below their summer 2021 levels but they remained well above their historic averages, according to the May gas report from the International Energy Agency.

It noted that the steep decline in natural gas demand reduced the need for storage withdrawals in Europe and the United States over the 2022-2023 winter.

As a result, storage sites closed the heating season with inventory levels standing well above their five-year averages.

“This is expected to reduce injection demand during the summer of 2023, and potentially ease market fundamentals,” stated the Paris-based IEA.

“However, the improved outlook for gas markets in 2023 is no guarantee against future volatility and should not be a distraction from measures to mitigate potential risks,” added the report.

Tight supplies

“Global gas supply is set to remain tight in 2023 and the global balance is subject to an unusually wide range of uncertainties. These include adverse weather factors, such as a dry summer or a cold fourth quarter and lower availability of LNG,” added the report.

The IEA explained that while the share of OECD Europe’s gas demand met by Russian pipeline gas fell to well below 10 percent in the 2022-2023 heating season, LNG effectively became a baseload supply for Europe, meeting over one-third of the region’s gas demand over the winter.

Russian piped gas exports to OECD Europe fell by an estimated 70 percent (or 50 Bcm) year-on-year during the winter.

While deliveries to Turkey declined by close to 30 percent, gas flows to the European Union plummeted by over 80 percent, translating into a drop of 47 Bcm compared to the previous heating season.

In contrast, Russia’s LNG exports to the EU rose by 5 percent compared with the previous winter period.

LNG flows from the United States increased by 30 percent, or almost 10 Bcm year-on-year, to account for over 45 percent of incremental LNG supply into Europe.

“This further reinforced the position of the United States as Europe’s largest supplier, accounting for over 40 percent of the region’s total LNG imports and meeting almost 15 percent of its gas demand,” said the IEA.

“Qatar increased its gas deliveries by 15 percent (or 1.5 Bcm), primarily supported by higher supplies to Belgium, France, Italy and Poland,” added the report.

The International Energy Agency (IEA) said it carried out new analysis and identified a challenging 30 billion cubic metres supply-demand gap in the 2023 Northern Hemisphere summer season.

The Paris-based IEA said that the gap would occur at a key time for refilling European Union storage as Russian volumes remained cut off and Chinese LNG imports began to rebound for the 2022 drops.

The IEA repeated its support for governments taking measures to reduce natural gas consumption amid the global energy crisis.

The new report is called “Never Too Early to Prepare for Next Winter: Europe’s gas balance for 2023-2024”.

It states that gas storage sites in the EU are now 95 full and putting them 5 percent above the five-year average fill level.

However, the report cautions that the cushion provided by current storage levels, as well as recent lower gas prices and unusually mild temperatures, should not lead to overly optimistic conclusions about the future.

Filling

“The process of filling EU gas storage sites this year benefitted from key factors that may well not be repeated in 2023,” explained the IEA.

“These include Russian pipeline gas deliveries that, although they were cut sharply during 2022, were close to ‘normal’ levels for much of the first half of the year,” added the report.

“Total pipeline supply from Russia to the EU in 2022 is likely to amount to around 60 Bcm, but it is highly unlikely that Russia will deliver another 60 Bcm of pipeline gas in 2023 and Russian deliveries to Europe could halt completely,” stated the IEA.

The agency noted that China’s lower LNG imports in the first 10 months of this year have been a key enabler of higher LNG availability for Europe to compensate for the drop in gas deliveries from Russia.

“If China’s LNG imports recover next year to their 2021 levels, this would capture over 85 percent of the expected increase in global LNG supply,” noted the IEA.

“And global LNG supply is expected to increase by only 20 Bcm in 2023, with about one-third of the growth coming from the United States,” said the report.

“The expected rise in global LNG supply next year is about half the average increase during the 2016-2019 period and much less than the likely decline in Russian pipeline deliveries to the EU next year,” it declared.

The IEA Executive Director Fatih Birol commented that with the recent mild weather and lower gas prices, there is a danger of complacency on Europe’s gas supplies,.

“When we look at the latest trends and likely developments in global and European gas markets, we see that Europe is set to face an even sterner challenge next winter,” he stated.

Natural gas demand growth in China, including LNG deliveries, is forecast to slow considerably, falling to 2 percent per annum between 2021 and 2030 compared with an average growth rate of 12 percent per annum between 2010 and 2021.

The International Energy Agency said Russia’s continued curtailment of natural gas flows to Europe had pushed international prices to “painful” new highs, disrupted trade flows and led to acute fuel shortages in some emerging and developing economies.

Russia’s invasion of Ukraine has upended the fuel investment landscape and intensified a commodity price shock with record earnings likely to be invested in new projects worldwide, including LNG export and imports projects over the next 10 years.