Gas 2024 Issue

Editor Rene Gonzalez editor@petroleumtechnology.com tel: +1 713 449 5817 Managing Editor Rachel Storry rachel.storry@emap.com Editorial Assistant Lisa Harrison lisa.harrison@emap.com Graphics Peter Harper Business Development Director Paul Mason sales@petroleumtechnology.com tel: +44 7841 699431 Managing Director Richard Watts richard.watts@emap.com Circulation Fran Havard circulation@petroleumtechnology.com ptq PETROLEUM TECHNOLOGY QUARTERLY

LNG accelerating the low-carbon energy transition D emand for liquefied natural gas (LNG) is expected to continue beyond 2040. China has overtaken Japan to become the world’s largest LNG importer, while demand from other Asian countries is also growing, even as domestic gas production in some of these countries is decreasing. Significant infrastructure projects are required to be able to import LNG from the Middle East and other exporting countries. High capital investments needed for regasification terminals do not guarantee secure supply when considering disruptions due to geopolitical conflicts. All this must be factored into the industry’s long-term planning for using LNG to provide grid stability while facilitating a higher share of renewables in the market. In the medium term, potential demand, such as from India, is set to consume new supply coming onto the market by 2025. The question is, who are the exporters that growing markets can depend on, especially when committing to long-term con- tracts? The big winners are the dominant exporters from the Middle East and Russia. This begs the question that as the top global natural gas producer and exporter, the US’s exports of LNG play a vital role in supporting global energy security. Following Russia’s invasion of Ukraine, the US has become the primary supplier of LNG to Europe. However, to what extent will the perceived flexibility and reliability of US LNG in global markets last? With the current US Administration enforcing a moratorium on planned LNG exports to non-Free Trade Agreement countries, compelling postponement or can- cellation of new liquefaction projects, Russia stands to win big by not only influenc - ing Europe and China’s LNG market but elsewhere throughout the globe. Against this backdrop, the US was again the largest supplier of LNG to Europe in 2023, accounting for nearly half of total LNG imports, according to data from Cedigaz. In parallel, Southeast Asia is increasing LNG imports to backfill domestic gas declines. The US EIA Short-Term Energy Outlook (6 February) expected the US benchmark Henry Hub natural gas spot price to average higher in 2024 and 2025 than in 2023 but remain lower than $3.00 per MMBtu. The forecast seems to be based on increases in natural gas prices as demand grows faster than supply in 2024. Developers advanced several LNG projects to the construction phase in 2023, following the signing of sale and purchase agreements (SPA), contracts specifying the terms and conditions of LNG supplies between seller and buyer, underpinning the projects. Developers signed contracts with buyers for almost 22 million metric tons per year of LNG last year, or about 3 Bcf/d of natural gas, according to data from the US Department of Energy (DOE) and company websites. However, the volumes con- tracted in 2023 totalled 52% less than the contracted volumes in SPAs signed in 2022. On 16 January 2024, a record high of 141.5 billion cubic feet (Bcf) of natural gas was consumed in the US Lower 48 states due to the ‘Polar Vortex’, exceeding the previous record set on 23 December 2022, according to estimates from S&P Global Commodity Insights. LNG’s dominance in the transition to net zero emissions and energy security will be enhanced with a range of technologies incorporating advanced analytics, the Internet of Things, and artificial intelligence to enhance efficiency, safety, overall operational performance, and ultimately capacity, including increased ammonia and hydrogen production, such as blue hydrogen. For example, blue hydrogen’s future, as discussed in this issue of Gas 2024 , is expected to become clearer by the end of the year, as the US DOE awards the first billion-dollar subsidies for demonstration projects and the Treasury Department issues guidance for companies that want to claim new tax credits for low-carbon hydrogen production.

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Rene Gonzalez

Gas 2024