For the second winter in a row, Europe faces a shortage of natural gas needed to keep warm and to make electricity. The war in Ukraine and the subsequent reduction in buying natural gas from Russia has been the biggest reason for this, although there are others, such as the shutdown of several nuclear power plants and reduction of natural gas production as part of several nation’s climate change goals.
To meet the high demand, European Union countries have increased their reliance on natural gas imports, and away from Russia. The block of 27 EU countries is the world’s largest importer of natural gas. Before the war, in 2019, Hungary, Finland, the Czech Republic, Slovenia, Romania, Bulgaria, Estonia, Latvia, Slovakia, Macedonia, Bosnia-Herzegovina and Moldavia imported over 90% of their natural gas from Russia, primarily via pipelines. But these imports from Russia are now restricted, creating a natural gas shortage and with winter coming up, there is significant worry about basic heating needs throughout the continent.
On to the rescue is the US, which has plenty of natural gas supply, the technology to convert it to liquified natural gas (LNG), and the means to export it to Europe. In addition, natural gas prices are lower in the US. Thus, LNG exports are quickly replacing Russian imported natural gas. LNG is natural gas that is highly compressed and chilled, making it easier to load on ships in large quantities for transport. The US is taking advantage of the demand by shifting cargoes intended for Asia and South America to Europe, obtaining higher prices for its LNG. Half of all US exports of LNG are going to Europe. The US has 7 terminals to produce LNG and export. Reports state that they have been operating at maximum capacities. LNG arrives at terminals where it is converted back to gas and placed on pipelines to facilities.
Germany, the EU’s largest user of natural gas, has no LNG terminals. It planned to import more Russian natural gas supplied via the new Nord Steam 2 pipeline. The pipeline was constructed at a cost of over $11 billion, but has not yet been commissioned due to the war in Ukraine. Germany is working hard to de-carbonize its energy sources and is pushing renewable power, such as solar and wind. However, these strategies will not replace the power derived from coal-fired, nuclear plants, and Russian-derived natural gas. Germany is working to construct new LNG terminals. EU countries, such as Denmark, Norway, and Holland are trying to increase natural gas supplies in the North Sea and other locations. However, many of the existing wells are running dry. A major find of natural gas has occurred in the Mediterranean Sea, off the coast of Israel. Israel has begun processing natural gas from there and has installed pipelines to Europe through Greece.
In the interim, however, natural gas costs will increase as demand is unlikely to subside as the EU fights an upcoming winter and tries to avoid a recession. It will have to use these alternative sources of natural gas, as well as encourage even more renewable power, and push for conservation.
CCES has the technical experts to help you assess the energy situation of your company, municipality, or buildings, to help you assess how to minimize costs and usage. Contact us today at karell@CCESworld.com or at 914-584-6720.