Offshore Energies Magazine - Issue 55 Spring 2023

EU's co-ordinated demand-reduction measures for gas were part of the REPowerEU and set a reduction target of 15% for August 2022-March 2023 by the same measure. Europe so far then is satisfying its needs, but only by scaling them back, manufacturing less and accepting more discomfort. The EU's bill for gas imports was €390bn, more than three times what it had been the year before. According to the International Energy Agency (IEA) in a mid-March paper, "gas supply is set to remain tight in 2023 with an unusually wide range of uncertainties and risk... Continuing the strong momentum in renewables growth seen in 2022 would also need sustained policy efforts." To emphasis the point, it convened a special ministerial meeting in mid-February, where 40 governments took part. Additionally, the European Commission relaxed its usually tight control of member states’ domestic support plans for industry and late last year it even intervened in the wholesale gas market with a price Bumper year for Grain LNG Last year was the busiest ever for National Grid’s Grain LNG terminal in southeast UK. It hosted 91 ships in 2022, or one every four days – 60% more than in 2021. During December’s cold spell it was working at 90% capacity – another record. The vessels carried over 82 TWh, almost 40% more than in 2021, some of which went through interconnectors to the continent. The UK has about a fifth of Europe’s total LNG import capacity and Grain is the biggest of the three terminals, the other two being in west Wales. Q4 2022 was also a record quarter for the team, with 37 ships docking between September and December compared with the seasonal average of 16. Grain LNG operates and sells capacity to a range of mostly long-term clients. Until a few years ago, Europe was the destination of last resort, as Asian spot gas was more expensive. Around a third of the tankers come from the US. Grain said UK energy security depends on a diverse mix of energy generation and sources, and "LNG is an important part of that."

ceiling for exchange-traded LNG with effect from this year. This could be counter-productive if it means sellers deliver their cargoes elsewhere instead where prices are higher. It might also lead to more bilateral trade off exchanges, meaning less liquidity and transparency. I n the event, the drop in prices has meant this price threshold of LNG has not been breached. But at its peak (August 26, 2022) Europe's benchmark hub TTF was trading at around $400/barrel of oil equivalent. So the EU built in a mechanism allowing the price cap to be suspended if the costs outweigh the benefits. And now the cycle is starting again, although with more gas in store at the end of March 2023 than March 2022. Among the possible risks on the downside though is the great unknown: China's LNG demand. The IEA, in its late February Gas Market Report , said there was an "uncertainty range" of about 40bn m³ for China's LNG purchasing this year: from 75bn m³ to 115bn m³ of pipeline equivalent. The IEA is plumping for 94bn m³ – the low end of the range. European gas demand saw LNG imports reach an all-time high of 180bn m³ thanks in part to new import infrastructure and enabled by an only modest recovery in Asia following the region’s demand decline in 2022. LNG export growth continues at around 4.3%/ yr thanks to the return of the 20bn m³/yr Freeport terminal to full production in Q1 2023. But there is a slow-down in new liquefaction capacity this year. A paper on EU energy solidarity published in February by the Oxford Institute of Energy Studies says: "While the EU has made a political decision to eliminate its dependence on Russian gas ‘well before 2030’, it is not in control of either the scale or the timing of this process. Helped by anomalously warm temperatures to date, the EU appears increasingly likely to get through the current winter relatively unscathed. "Next winter however could be significantly more challenging if Russian gas supplies were to decrease further or stop altogether, especially if accompanied by rising China LNG demand, interruptions of other supplies, and cold winter temperatures. In this case, sharing of limited gas supplies across the EU could become a necessity." The EU sharing mechanisms have not yet been invoked so there is no certainty that they will work as intended. Change of contracts The removal of so much lower-priced Russian pipeline gas – although some still comes to Europe by tanker as LNG – has turned the major buyer of pipeline gas into

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