Gas: Are there alternatives to Russia?

Created: 02/08/2022Updated: 02/08/2022 10:49 am

By: Matthew Schneider

INTERVIEW: Energy expert Katharina Stecker on liquefied natural gas

Munich – The gas storage tanks are emptying.

The supplies from Russia are faltering.

How dependent is Germany on these deliveries?

Are there alternatives and what role could liquefied natural gas (LNG) play?

We spoke to Katharina Stecker, Head of Sales, Supply Security and Gas-Specific Questions at the Federal Association of Energy and Water Industries (BDEW).

In the wake of the energy crisis, many experts are talking about LNG.

What is it exactly?

LNG, i.e. liquefied natural gas, is natural gas that is cooled to -162˚ Celsius and then only has one six hundredth of its original volume in the liquid state.

Therefore it can be transported in tankers.

These land the gas at European terminals, where it is brought back to normal temperature and pumped into the normal gas network.

What are the most important producing countries?

Large global LNG exporters are e.g.

B. Qatar, Australia and the USA.

The focus of use is in East Asia.

European imports have also increased significantly in recent years.

In addition, LNG terminals for receiving and reconverting have emerged in numerous major European ports.

What role does LNG play on the world market?

LNG is particularly in demand in Asia, because these countries have a high demand for energy and are also switching from coal to gas in many areas.

There are also catch-up effects because the economy after Corona is again demanding more energy.

In figures: By 2024, East Asia will account for a full 77 percent of global LNG supplies, and China around 30 percent.

Incidentally, another major importer is the growing economy in Brazil.

In Europe, especially in Germany, we are mainly supplied with pipeline gas, for example from Russia, Norway or the Netherlands.

However, since the demand in Europe is also increasing and natural gas is no longer transported to us only via pipelines, LNG contributes to further diversification and more flexibility of the import sources for natural gas in Europe and in Germany.

In the wake of the Ukraine crisis, experts fear that Germany could be cut off from Russian gas.

What would that mean?

This is a scenario that we have not experienced in Germany before.

Russia is an important supplier, with half of Europe's gas coming from there.

If the deliveries were to fail from one day to the next, this would no longer be an everyday situation.

But the European regulations on security of supply would take effect immediately and one would examine: What alternatives are there?

Where are there still quantities in stores?

Who could supply additional quantities?

Where can be reduced?

In any case, household customers and various institutions are specially protected by legal provisions.

Does the additional volume mean the LNG from the USA and Qatar?

Yes, but not only.

With other suppliers, too, the question arises as to which quantities are already contractually bound.

But there are additional funding opportunities.

The currently largest LNG providers are Qatar, Australia and also the USA.

There, in particular, many producers are able to expand their supply at short notice in order to react to fluctuations in demand.

The United States wants to increase its LNG production by 86 percent, or 55 billion cubic meters, between 2020 and 2024.

Because the Asian market in particular is growing rapidly: between 2020 and 2024, demand will increase by more than a quarter, that is around 89 billion cubic meters of natural gas.

To put this in context: According to the International Energy Agency, total world trade in LNG will be 560 billion cubic meters in 2024.

So are we dependent on Russia after all?

Russia is a major supplier of natural gas but also a major supplier of LNG.

Germany continuously obtains natural gas from numerous different supplier countries such as Norway, Russia, the Netherlands or from its own German production.

North African countries and countries in the Middle East also produce natural gas and export it to Europe.

But for any market, diversification makes the market more resilient.

The EU Commission has also recognized this.

A key objective of the EU Energy Union is therefore to ensure that all Member States have access to LNG markets and diversified sources of supply.

LNG can be delivered from a variety of different origins around the world.

According to the EU Commission, this enables the EU to diversify its gas supply sources to a greater extent and thus also significantly improve the security of energy supply.

At present, Western European countries that have access to LNG import terminals and liquid gas markets are far more resilient to possible supply disruptions than countries dependent on a single gas supplier.

Is the current infrastructure sufficient for this?

Europe has various LNG terminals that are geographically well distributed.

Although Germany does not have its own LNG terminals, it can be supplied with LNG at short notice via the market in the Netherlands and via the European gas network.

Despite the increased European demand, the capacities of the European LNG terminals are not yet fully utilised.

However, Germany has to compete with other participants on the world market for more quantities.

The proportion of LNG deliveries is also increasing in Europe, since the price level is aligning with the prices paid for LNG in Asia due to the increased price for natural gas.

This leads to deliveries being shifted to Europe.

A resilient energy system is based on various energy sources.

Portfolios that have shares from long and short-term contracts,

Interview: Mathias Schneider

A LNG tanker in the Singapore Straits.

Evaporating gas has to be vented from the tanks and drives the engines or steam turbines in these tankers.

© Photo: Igor Grochev / Shutterstock

Katharina SteckerGas expert at BDEW © BDEW