LNG Industry Faces Uncertain Future
Liquefied natural gas has become a major growth driver for the energy industry. Burning much more cleanly than either coal or oil, gas has earned a place in the energy transition—but that place is far from secure. Despite continued strong demand for LNG—which saw Qatar order 12 new LNG carriers—the expected growth in that demand may fail to live up to expectations. What’s more, challenges abound on the supply side, from sanctions on Russian LNG to supply chain and regulatory problems with U.S. projects, according to a new report by Wood Mackenzie. In early August, a U.S. appeals court vacated the remand authorization of NextDecade Corporation’s Rio Grande LNG export project issued by the Federal Energy Regulatory Commission on the grounds that the FERC should have issued a supplemental Environmental Impact Statement during its remand process. In general terms, this means that the Rio Grande LNG project will be delayed. Construction on Phase 1, which will include three liquefaction trains, continues. Still, the court’s ruling will affect the rest of the project, delaying the final investment decision on Phase 4 and possibly affecting the construction of Phase 2 and Phase 3. In its report about the outlook for the LNG industry, Wood Mac noted that the Rio Grande LNG case is an example of the risks surrounding LNG projects in the United States that are yet to receive a final investment decision, “compounding the uncertainty created by the Biden administration’s “pause” on export approvals in January.” The analysts noted that this infamous pause will probably be lifted after the November elections. After that, regulators would need to devise a new framework for future approvals of such projects in line with all relevant regulations. There is also a potentially more serious issue of demand. The biggest driver of demand growth in the liquefied natural gas space is certainly Asia. Yet right now, the going is good, with Asian imports up by 15% over the first eight months of the year, per Wood Mac. However, Chinese LNG imports are about to start declining because its gas storage sites are nearing capacity, Bloomberg reported earlier this month. And if the winter is mild, these will not empty fast, undermining overall regional demand. Another issue with Asian demand and any bullish assumptions about it is price sensitivity. So far this year, prices for LNG have been quite affordable, hence the strong increase in LNG imports. But, as Wood Mac’s analysts point out in their report, most Asian countries remain highly sensitive to price changes, ready to stop buying the moment the price goes too high. This, incidentally, may be just what is on the cards for U.S. natural gas. Next year, there could be substantially higher gas prices in the United States, Reuters energy columnist Gavin Maguire reported last week, citing data from LSEG. The forward strip of the Henry Hub benchmark suggests that U.S. natural gas prices could average $3.20 per million British thermal units (MMBtu) next year. This would be up from an average price of $2.22 from the benchmark U.S. natural gas price so far this year. Quite a substantial price increase indeed, but not unexpected in the least, after gas drillers were forced to start shutting in wells in the face of weak prices that were eating into their profits. Such a development would see U.S. LNG exports become costlier, discouraging price-sensitive buyers in Asia—and possibly in Europe. LNG imports into Europe, including the EU, Norway, the UK, and Turkey, fell by 20% over the first half of the year, a transition think tank reported this month, with LNG imports into the EU falling by 11%. According to the Institute for Energy Economics and Financial Analysis, LNG imports would fall further over the full year, by some 11.2%. Per the think tank, this is because demand for LNG has reached its peak and, from now on, will be falling. It is, however, likely that price plays a part, too. Europe is no longer the bottomless pockets operation it was until a couple of years ago, and has had to become more frugal with its money. There is also the supply side. The EU specifically filled up its storage caverns with gas last year. The winter turned mostly mild, and a lot of that gas remained unused. European demand, then, may not have peaked, but prices would affect it. Elsewhere, Western sanctions have made it hard for Novatek’s Arctic LNG 2 to really take off. The facility is producing liquefied gas. However, according to media reports, this gas is being shipped to storage instead of to overseas buyers. In Florida, an LNG project has been delayed for five years due to supply chain issues and high costs. “The COVID-19 pandemic created an extremely challenging environment for the negotiation and execution of contracts. Those impediments continued for some time after the effects of the pandemic had begun to subside in 2022,” the company behind the Eagle LNG project told the FERC. Finally, there is the emissions question, which Wood Mac says is going to become increasingly prominent in the future—if other countries follow the EU’s example of insisting on low-emissions LNG, regardless of the price. And that price will inevitably go higher as emission regulation piles on.
Jindal Steel to have big investment on Green Hydrogen
Jindal Steel (JSPL) and Jindal Renewables (JRPL) have inked a historical Memorandum of Understanding to implement India’s biggest investment in green hydrogen by any Indian steelmaker to date. This collaboration underscores a major commitment by both companies towards decarbonization and green energy leadership in India’s steel industry. The MOU outlines JSPL’s plan to integrate green hydrogen into its Direct Reduced Iron (DRI) units in Angul, Odisha. This initiative represents a significant leap toward low-emission steel production. In the first phase, Jindal Renewables will develop a green hydrogen generation capacity of up to 4,500 tons per annum set to commence by December 2025. In addition, the project will also entail a supply of 36,000 tons of oxygen per annum that will be used in the Angul steelworks. JRPL will also be supplying ~3GW of renewable energy to JSPL’s facilities reducing the steelmaker’s dependence on coal-fired energy by 50% in the next 2-3 years. This integration of green energy is expected to drastically lower the company’s carbon footprint. Mr. Sanjay Singh, Director of Strategy and Corporate Affairs at JSPL, expressed his enthusiasm for the collaboration, stating, “This MOU marks a pivotal moment in our journey towards decarbonization using green hydrogen and green energy, accelerating our transition to lower emission steel.
Brazil To Cooperate In Ethanol Production Technology In India
On the sidelines of the G20 Agriculture Ministerial Meeting held on 12 and 13 September 2024 in Cuiaba, Brazil committed to cooperating with India on ethanol production technology. A meeting between Minister of State for Agriculture and Farmers’ Welfare Ram Nath Thakur and Brazil’s Minister of Agriculture and Livestock, Carlos Favaro, took place on September 13, the Ministry of Agriculture & Farmers Welfare stated in a release on Sunday. During the meeting, both sides discussed cooperation in science and technology, ethanol production, and market access. Both parties agreed to collaborate in science and technology, expressing hope that the Memorandum of Understanding between ICAR (India) and EMBRAPA (Brazil) would be finalised before the G20 leaders’ meeting in November. India is seeking access to the Brazilian market for its Sorghum, Rapeseed, Cotton, Wheat, Barley, and Onion bulbs, while Brazil is seeking access to the Indian market for Citrus, among other products. Both ministers expressed optimism about resolving the pending issues that are currently obstructing trade. In June 2024, at the 63rd council meeting of the International Sugar Organisation (ISO), India sought support and cooperation from member countries to adopt more sustainable practices in sugarcane cultivation, sugar and ethanol production, and the better utilisation of by-products. India is the third-largest ethanol producer globally, following the USA and Brazil. The ethanol blending percentage in India increased from 5 per cent in 2019-20 to 12 per cent in 2022-23, while production rose from 1.73 billion litres to over 5 billion litres during the same period, according to the Ministry of Consumer Affairs, Food & Public Distribution. Official data shows that in 2022, bilateral trade between India and Brazil grew by 32 per cent to USD 15.2 billion (India’s exports were USD 8.8 billion, and imports were USD 6.4 billion). In 2023, India’s exports stood at USD 6.9 billion, with imports at USD 4.7 billion. The Indian delegation, led by Ram Nath Thakur, held bilateral meetings with the USA, Brazil, Germany, the UK, Japan, Spain, and the UAE.