Europe’s Energy Landscape and LNG’s Role
At the recent FLAME 2024 conference in Amsterdam, the energy sector’s gaze was fixed on the future of natural gas, with a spotlight on LNG exports and the balance of energy demands. Experts pondered the viability of new LNG projects given the ramp-up of US and Qatar LNG supply expected around 2026 and the ongoing energy transition.
Despite climate advocates pointing towards a global decline in gas demand post-2030, questions remain about the potential increase in LNG demand and Europe’s commitment to long-term contracts amidst decarbonization efforts. The East Med gas, with its prospects for export to European and global markets, was also a focal point of discussion.
In Europe, a post-crisis reality is emerging. Factors such as a mild winter, advances in energy efficiency, renewable energy growth, and industrial contraction have reduced natural gas consumption by approximately 20%. Gas prices are down but expected to remain above pre-crisis levels. The region’s ambitious Fit-for-55 targets seem increasingly challenging, indicating that gas will continue to be part of Europe’s energy mix into the 2030s, albeit with declining demand. By 2040, Europe’s LNG demand is forecasted to drop to around 100 million tonnes per annum (mtpa), casting uncertainty over long-term LNG contract commitments.
The EU Green Deal is facing scrutiny as concerns about transition costs rise. Post-elections in June, the focus may shift towards defense and security, potentially sidelining the Green Deal. The EU must now balance environmental goals with economic realities and competitiveness challenges.
Asia: The Next Frontier for LNG Demand
The future of LNG demand is predominantly seen in Asia, particularly in China and India, where rapid growth necessitates sustained natural gas usage. Asia is projected to account for half of global energy consumption by 2050, with many countries turning to gas as a cleaner alternative to coal. China aims to increase its natural gas share from 8% in 2023 to 15% by 2030, while India targets a rise from 6% to 15% in the same timeframe.
The consensus at FLAME 2024 was that not only will new LNG supplies be absorbed by the market, but a supply-demand gap is anticipated by 2030. Global LNG demand could reach approximately 700mtpa by 2040, driven by China, India, and Japan. In China alone, demand is expected to surge from about 70mtpa currently to around 160mtpa by 2040.
Without significant shifts in climate policy and technological advancements, natural gas and LNG will remain integral to supporting renewables and addressing the anticipated increase in global energy demand, particularly in Asia and Africa. The US and Qatar are poised to meet much of this growth in LNG supply, but Cyprus also has potential.
Cyprus’s Potential in LNG Exports
With Chevron planning to export gas from Aphrodite to Egypt and Eni following suit with block 6, questions arise about Cyprus’s role in LNG exports. ExxonMobil’s discovery of the Glaucus gas field and ongoing exploration suggest substantial gas reserves that could support a liquefaction plant for LNG exports from Cyprus.
The country’s energy minister highlighted promising drilling targets, with exploration set for this year and next. ExxonMobil’s strategy hinges on finding large gas quantities to justify building a liquefaction plant. If successful discoveries are made, Cyprus could become a significant player in the LNG export market by the end of this decade or early next.
The FLAME conference exuded optimism for the future of LNG, with Cyprus’s prospects looking up. However, caution is advised as global gas markets are complex and developing greenfield projects takes time. Success for Cyprus hinges on discovering sufficient gas reserves and navigating the evolving global market dynamics.
