(Bloomberg)-This year's natural gas is like a roller coaster, most of the time is spent climbing new heights.
Spot contracts in Asia and Europe soared to record levels, triggering factory closures and bankruptcies of energy retailers from Singapore to the UK. Higher prices also mean that storage facilities are not being replenished as usual, and now they are quickly depleting.
The worst is far from over. Cold winter weather is approaching in many parts of the world, and people still worry that the market may lose balance for most of next year.
Here are some questions that traders will ask in 2022:
What happened to Nord Stream 2?
When the Nord Stream 2 pipeline from Russia is launched, the sky-high prices in Europe should plummet, as the new flow eases concerns about shortages. The problem is that no one is completely sure when it will happen.
On Friday, November 12, 2021, the Nord Stream 2 gas terminal in Lubmin, Germany. Russia’s Nord Stream 2 may take several months to clean up the remaining red tape, and then the controversial pipeline begins to send natural gas to Germany to help ease the pressure of Europe’s energy crunch.
The 1,230-kilometer (764-mile) project is trapped in bureaucracy, awaiting approval by German regulators and review by EU authorities. This means that the continent may spend most of its time in winter when there are no additional billions of cubic meters that Russia can extract.
According to Bloomberg New Energy Finance, the approval process may delay the start of operations until the spring or even summer of 2022. The "pipeless" situation may push storage to extremely low levels at the end of winter. This may force the government to approve the pipeline in some way before then to keep families warm and lower bills.
China’s seemingly endless appetite for liquefied natural gas has been amazed by the market. This year, China will become the world’s largest importer of super-refrigerated fuel – well ahead of analysts’ predictions.
The continuing energy shortage is partly due to China’s need to power its economy while at the same time abandoning the use of dirty fuels, especially coal, in order to achieve ambitious climate goals. Economic growth in 2021 will exceed the target, and the government has expressed confidence in the next year-it may leave less natural gas for Asian competitors, Europe and South America.
"China will obviously increase natural gas demand," said Steve Hill, executive vice president of Shell Energy. "If China must find a solution to reduce emissions, natural gas will have to play a bigger role, because eventually, some coal will need to be replaced."
From the United States to Mozambique, the competition for LNG export projects is fierce, vying for the final investment decision. Following the suspension of approvals due to the Covid-19 pandemic, new projects are being approved. The latest project is Woodside Energy Ltd.'s Scarborough development project in Australia, which is part of a US$12 billion investment plan.
US developers-including Cheniere Energy Inc., Venture Global LNG Inc. and Tellurian Inc.-are busy signing supply agreements for their proposed export projects. The two companies insist that they will receive financing next year.
The governments of Australia and Japan stated that the world needs to invest more in upstream natural gas supplies to avoid recurring shortages. Whether this will be achieved in 2022 will help determine whether there will be enough natural gas at the end of the decade.
Can the United States become number one?
Two new LNG export facilities in Louisiana could transform the United States into the world’s largest exporter. The commissioning process of the Sabine Pass and Calcasieu Pass LNG 6 trains has already begun, and now it is only a question of when they will deliver the first shipment.
On Tuesday, August 25, 2020, Sabine Pass, Texas, USA, before Hurricane Laura, the storage tank was located at the Sabine Pass LNG export terminal. When Hurricane Laura makes landfall on the coast of Texas, it will become a roof-damaging category 3 storm-the coast of Louisiana, which may cause up to 12 billion U.S. dollars in damage to the area and may shut down 12% of the U.S. refining capacity. moon.
Sabine Pass has produced its first drop of liquefied natural gas and is expected to be put into commercial service at the end of the first quarter, about a year ahead of the original guaranteed completion date of the train. Calcasieu Pass uses a modular construction method and receives a small amount of natural gas as the raw material for its first trains.
Although the United States is currently second only to Qatar and Australia in terms of LNG production capacity, if overseas competitors encounter production problems or maintenance difficulties, the United States may top the list in production.
The Dutch gas trade is no longer just a Dutch patent. Gordon Bennett, managing director of ICE Futures Europe utilities market, said that the official title of the ownership transfer tool benchmark has become the Brent crude oil in the natural gas market, and countries outside Europe have more participation.
The liquidity of the Asian spot benchmark Japan and South Korea indexes has increased in recent years, but still lags behind the TTF, which makes European indexes a more trusted choice for traders. This year, many overseas LNG supply transactions, including purchases by Integracion Energetica Argentina SA and Korea Gas Corporation, are related to TTF.
“For traders, they are using it more and more due to the value at risk, and it is currently the main driver of the price level,” said Sarah Behbehani, managing director of BEnergy Solutions DMCC in Dubai. The price of LNG in Asia has changed in tandem with the Netherlands last year.
Where is the nearest exit?
In the next few decades, the debate about the role of fuel in the energy transition will intensify. In addition to being a high emitter of carbon dioxide, the entire natural gas value chain will also leak methane, which may subvert global efforts to curb greenhouse gas emissions.
Companies are facing increasing pressure from investors, governments and consumers to strengthen their green certifications. Italian energy giant Enel SpA has set a deadline for abandoning natural gas in 2040, saying that the fuel is no longer competitive in power generation. France Post Bank plans to withdraw from the natural gas industry by 2030 and become the first bank to make such a commitment.
However, natural gas provides flexibility for systems based on renewable energy. It is less polluting than coal and can be used to make blue hydrogen. Manufacturers such as BP Plc, Sinopec, Equinor ASA and Royal Dutch Shell Plc all hope to use hydrogen as part of the next generation of energy.
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