Forecasts of tighter LNG supplies along with volatile prices for the next few years are keeping buyers on edge and are impeding the push towards alternative energy sources. As a result of these factors, energy security has become a top priority for importers.
Europe is importing record volumes of liquefied natural gas (LNG) from Russia despite Western sanctions against Moscow. The war in Ukraine is driving up prices across Europe and Asia, and is fanning inflationary pressures.
“Geopolitical conflicts have made gas markets unstable,” said Yalan Li, chairperson of the board of directors at Beijing Gas Group said at the World Gas Conference.
She went on to add, if gas prices become unbearably high for users, markets will see a return of coal. Tight supplies have weakened the confidence of governments in transitioning to gas.
China’s import of LNG are forecast to shrink this year; last year it was the world’s biggest LNG importer.
The world’s top energy consumer are now turning to cheaper energy alternatives including coal. India, a key growth market for LNG, is seeing a slowing of LNG purchases due to high prices.
Energy executives are calling for more financing and investments in the oil and gas sector to stabilise prices and boost supplies in order to maintain the momentum on the coal-to-gas switch.
Stabilising LNG prices has become the industry’s top priority since prices have become very volatile.
“If the current situation persists for a long time, some experts say it will lead to demand destruction, especially in emerging countries,” said Yukio Kani, managing executive at Japan’s top LNG importer JERA.
Yu Jeong-joon, Vice Chairman from SK E&S, has also called on international financial institutions to provide more support for developing countries’ shift to LNG.
Despite Western sanctions on Russia, LNG supplies from Russia’s Sakhalin-2 to Japan are still flowing. Tokyo is however stepping up efforts to diversify LNG supplies.
LNG purchases are “going from just in time to just in case”, said Yukio Kani, managing executive officer at Japan’s top importer JERA, underscoring the need to secure supplies.
“The world has been trying to move toward decarbonization, and we really tried to secure sustainable energy but we face a serious challenge in achieving it”.