Right now, the first shipments of liquefied natural gas (LNG) from America’s new Plaquemines Parish gas facility in Louisiana are heading across the Atlantic towards Europe. Whether they arrive there is another matter.
LNG is a hot global commodity – even more so since the end of the Russia/Ukraine transit deal on 1 January 2025, increasing Europe’s dependence further on LNG to meet its gas needs.
And when demand is high, many tankers remain ‘open to orders’ and can simply change course if a higher bidder emerges elsewhere.
End of an era for Russian gas supplies
Prior to the Russia/Ukraine conflict, Russia supplied around 40% of Europe’s gas via a network of pipelines:
The result is that Russia now supplies less than 5%, which despite sanctions, includes shipments of LNG into ports in France and Belgium.
US supplies nearly quadruple
Filling the gap are LNG supplies from the US.
These jumped from around 15 million tonnes a year into Europe between 2018 to 2021, to 55 million tonnes a year in 2022 and 2023.
Last year, however, American LNG imports did decline to just below 44 million tonnes. This was due in part to outages at a key LNG export terminal (Freeport in Texas), but also to lower European gas demand as more power was generated from renewables.
Qatar’s market share reduces
However, the Israel/Gaza conflict ensures the US maintains a dominant supply position.
This is because Qatar, a key European LNG supplier in previous years, no longer has a direct supply route, thanks to the Suez Canal becoming a ‘no-go’ due to attacks from Houthi groups protesting at Israel’s actions in Gaza. (Although, if the Israel/Gaza ceasefire holds, this may change.)
This is all good news for America, who with plentiful reserves of natural gas that were subject to falling prices at home, had need for new markets.
Indeed, January sees American LNG exports hitting an all-time high. And it’s not just Europe that’s buying more LNG.
Asia also driving demand
China remains the world’s number one LNG market, accounting for around 18% of all imports, followed by Japan and South Korea.
And developing markets in countries such as India, Bangladesh and the Philippines are also boosting global demand.
As a result, gas liquification facilities – which cool natural gas to -161oC, reducing it to 1/600th of its gaseous volume – are expected to increase by 40% between 2024 and 2029, with the US a major source.
How does the UK source gas?
Prior to the Russia/Ukraine conflict, Russian gas only accounted for a small share – perhaps 4% – of our national demand.
We already relied on LNG imports. And today, these account for just under 20% of our annual demand.
We also buy gas from the companies that operate the dwindling gas fields in the North Sea, which last year met around 50% of our domestic demand.
The rest of our supply comes via pipelines – the largest share from Norway, which meets just over 30% of our demand (and 30% of Europe’s gas demand via direct pipelines).
And we have two-way pipelines (interconnectors) to the Netherlands and Belgium that allow us to import or export gas, depending on need.
At the mercy of the market
Unlike mainland Europe, we have minimal long-term storage facilities – enough for just 12 days’ supply during winter periods.
So, this puts us far more at the mercy of the market because we cannot stockpile and sit tight to wait for prices to reduce – we need to keep supplies flowing with regular shipments.
This increase in both US LNG terminals and exports – which Trump has pledged to facilitate further – will provide us with more certainty of supply.
It’s likely too that while an increase in US supply may not necessarily translate to lower prices in the short term, it should help to reduce the extreme volatility we’ve seen in the market over the past few years.
Need for gas to endure
Of course, our continued use of gas goes against our national targets to reduce emissions.
The progress we’ve been making to decarbonise electricity generation has certainly reduced demand.
But while we are using less to produce power via gas-fired generation, as a country, we still rely on gas for heating – mainly domestic, but also industrial.
And without a viable commercial alternative to replace gas for heating and cooking, our dependency on imported gas is not about to abate any time soon.
To keep up to date with all the latest developments in the UK’s fuel supply and the energy industry as a whole, keep checking our trending Energy Market & Industry topics.