Challenges and Developments in the Global LNG Market
In a significant development for the energy sector, Egypt’s declining production at the Zohr gas field has led to a slump in output, now standing at 2 billion cubic feet per day (cf/d). With projections indicating a further decline to 1.6 billion cf/d by the end of 2024, Egypt faces challenges in meeting its domestic energy needs, let alone exporting LNG to Europe this summer.
The Zohr field, once heralded for its potential, has seen its proved reserves downgraded to 10.9 trillion cubic feet (tcf), positioning it behind Israel’s Leviathan and Tamar fields in terms of size. This comes as a blow to Egypt, which is grappling with the disappointment of Eni’s Orion well and is in dire need of a significant gas discovery to bolster its waning production.
However, there is a glimmer of hope with Chevron’s commitment to invest $3 billion over the next two years to develop the Nargis gas field. This investment is part of a broader international effort to support Egypt, with European Commission President Ursula von der Leyen announcing a substantial EUR 7.4 billion aid package aimed at enhancing EU ties with Egypt, addressing migration issues, and promoting energy sales to Europe.
Meanwhile, ExxonMobil is pushing forward with its Rovumba LNG project in Mozambique, indicative of the growing global natural gas demand which the Gas Exporting Countries Forum (GECF) expects to increase by 34% by 2050. Qatar is also expanding its LNG capacity, while the US has temporarily halted its LNG expansion plans.
Despite low European TTF gas prices, around EUR 24.50 per MWh, and increased LNG imports by China and India, Europe’s energy landscape remains complex. Germany is adapting its energy strategy by planning a fleet of gas-fired, hydrogen-ready power plants and signing LNG deals that extend past 2040. These moves raise questions about the impact on Germany’s net-zero ambitions and the future of the EU Green Deal.
The European Commission is facing pressure to focus on defense transformation and economic security over environmental goals. With Europe still heavily reliant on hydrocarbon imports and struggling to replace them with clean energy, the EU is urging a reduction in Russian LNG imports and grappling with challenges in decarbonizing the automotive sector.
As Europe navigates these turbulent waters, the US is witnessing an expansion in LNG exports despite a decrease in gross consumption of natural gas. Venture Global’s acquisition of nine LNG vessels marks a significant step for a US LNG producer.
In Asia, China’s industrial production surge has led to a 15% rise in LNG imports, signaling robust energy demand that affects the global LNG market. These developments underscore the dynamic nature of the energy sector and the strategic maneuvers by key players across the globe.
Dr Charles Ellinas, Senior Fellow at the Global Energy Center, Atlantic Council, provides insights into these unfolding events in the energy landscape. Follow his expert commentary on Twitter @CharlesEllinas.
