There’s a growing global shortage of liquefied natural gas (LNG) that’s expected to bring a sustained period of higher prices and extreme volatility, according to analysts with Oslo, Norway-based consultancy Rystad Energy.
Russia’s invasion of Ukraine – and the subsequent decision by European countries to seek other suppliers of natural gas – is exacerbating an already tight LNG market.
“There simply is not enough LNG around to meet demand,” said Rystad senior analyst Kaushal Ramesh.
“In the short term this will make for a hard winter in Europe.”
World LNG demand this year is expected to hit 436 million tonnes, over 25 million tonnes more than the available supply of 410 million tonnes, Rystad forecasts.
“By shunning Russian gas, Europe has destabilized the entire global LNG market that began the year with a precarious balance after a tumultuous 2021,” analysts said.
And while more supply is expected to come online after new projects are completed in 2024, the current shortfall is likely a preview of more episodes to come.
Even before Russia’s invasion of Ukraine, global LNG forecasts saw a gap emerging between supply and demand in the mid-2020s.
The most recent forecast by Shell sees world LNG demand crossing 700 million tonnes in 2040, nearly double consumption in 2021.
In the long term it will be Asia that drives demand growth, Shell said, as domestic gas production declines, regional economies grow, and LNG replaces coal to reduce emissions and improve air quality.
Today Europe is scrambling for more LNG, and discussions are reportedly underway to have Canada come through with a solution. While the fastest option could be to reconfigure the Saint John LNG import terminal to an export facility, Canada’s vast natural gas resources offer much in the way of long-term potential.
The LNG Canada terminal, now under construction at Kitimat, B.C., will help improve world supply by adding 14 million tonnes per year starting in 2025.
Also on Canada’s west coast are three proposed projects – Woodfibre LNG, Cedar LNG, and Ksi Lisims LNG – which would all come onstream before 2030. Cedar LNG and Ksi Lisims LNG are both partly owned by Indigenous communities: the Haisla Nation and Nisga’a Nation, respectively.
In Atlantic Canada there is also the proposed Bear Head LNG project, floating Goldboro LNG project, and LNG Newfoundland and Labrador, which would be partly owned by the Miawpukek First Nation.
By 2035, Canada could be supplying the world with nearly 53 million tonnes of LNG per year, according to Canadian Energy Centre research.
Increasing supply of LNG from Canada would not only improve energy security by reducing reliance on Russia, it can also help reduce world emissions.
The International Energy Agency says that using natural gas transported as LNG instead of coal to fuel power plants reduces emissions by about 50 per cent on average.
LNG from Canada can deliver an even bigger decrease, reducing emissions by up to 62 per cent, according to a 2020 study published in the Journal for Cleaner Production.
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