Could LNG Solve Our Gas Shortage?

The energy crisis has been well documented over the past two months, but we’re often asked about the solutions that could change the current landscape and improve the situation for residential and commercial customers.

Many people comment that renewable energy is the future and we would certainly agree. However, when we assess our current position in the UK we’re some way off being able to rely on wind, hydro, biomass and solar power. In 2020, 43% of the UK was powered by green energy and the target is that by 2035 we’ll be entirely powered by renewable solutions. Unfortunately, that’s 10-15 years away so the imminent issue is how do we ease the pressure for business customers?

The Situation

There’s a number of different variables causing the current energy predicament, but in the main it’s due to supply and demand issues. Most countries around the world rely heavily on gas and the demand has increased substantially for the majority of countries. Consequently, the UK’s competing internationally to restock their supply.

In 2021, the UK had to temporarily fire up coal power stations after a shortfall in expected wind energy due to unseasonal weather.

Furthermore, the Nord 2 pipeline has been delayed and looks unviable moving forward due to geopolitical tension.

Liquefied Natural Gas (LNG)

One solution that’s been proposed is increasing our reliance on Liquefied Natural Gas (LNG), yet there’s a number of logistical questions that need to be answered.

Liquefied Natural Gas is non-corrosive, odorless and non-toxic. It’s produced by cooling gas to -162ºC and means the gas can be transferred in a liquid form by ship. Gas in liquid form is around 600 times smaller than in a gaseous state.

The United States, parts of Africa and Middle East countries export LNG and Europe is keen to explore avenues to increase the volume imported, instead of purchasing direct from Russia. At present, 40% of gas in mainland Europe comes from Russia.

The American government has raised concerns about increasing their capacity to generate gas and transfer LNG overseas as it conflicts with their environmental policy of moving away from fossil fuels.

According to the US Fossil Energy And Carbon Management website: “In 2020, the U.S. exported almost 2,400 billion cubic feet (Bcf) of natural gas in the form of LNG in large LNG tanker ships, along with a small quantity shipped by container or in trucks.  In total, as of August 2021, U.S. LNG has been delivered to 40 countries on five continents.”

Whilst LNG could provide a short term and immediate solution, questions exist around whether it’s logistically feasible to meet the capacity required. If other European countries implement the same procurement strategy, then what will happen to the long-term unit cost of gas and will we continue to see a supply and demand problem?

Qatar was the world’s largest exporter of LNG until recently and is planning to increase capacity to 110 million tonnes by 2026 (up from 77 million), but that’s still four years away. The primary concern at present is the next winter and subsequent winters. Gas reserves in the UK and across Europe are low and winter will quickly arrive again. The demand for LNG also means some countries like Bangladesh and Pakistan, are unable to afford the costs (because other countries are willing to pay more) so they’re experiencing blackouts and energy shortages.

Renewable energy will contribute significantly towards the UK energy market over the next 10 years and production of energy is forecast to continually grow. The government is investing resources in battery storage technology and consequently this will influence our ability to deliver a financially and environmentally sustainable and greener future.

 

If you have questions about your business energy strategy or would like to discuss a medium to long term plan for your procurement, please get in touch.

Subscribe to
newsletter