It is clear that the growing Asian market will have a significant impact on Europe. In a recent speech, Australian PM Malcolm Turnbull explained that it is his vision for Australia to become the world’s number one LNG provider in the next few years. Australia already has a large presence, with Qatar and the other Middle Eastern belt countries providing a high percentage of the remainder. In order for Australia to achieve its aim, there must be a high level of investment, and it is clear from the projects already ongoing (to build LNG drill sites in the Indian Ocean) that this is forthcoming. Will this Asian investment have a knock-on effect in Europe? It is difficult to say.
Indeed, the Asian market would be prudent to take lessons from Europe’s experience in the LNG market. Over the last ten years, gas demand in Europe has reduced by one-fifth and we must not take LNG growth for granted. Security of supply was tempered by the political tensions between Russia, a major supplier of gas, and Western Europe. With this, the public opinion was affected which meant that despite a strong environmental and economic case, large companies did not consider the weight and influence of the European citizens. There are three key lessons to learn: innovation is key, and learning how to build projects; collaboration is crucial, between the supplier, project management team and customers; and development, embracing new processes and technology.
The investment being made clearly shows the LNG market sees opportunities for growth, with these projects often costing in the tens of billions. This highlights a strong belief that the LNG market will increase its market share of the global energy mix, even as renewables become more apparent in Europe. LNG retains its strong position, above other energy sources, as being more flexible in how it can be transported. Increased use of LNG will result in the investment of more liquefaction factories and improved infrastructure within the networks. Innovation and collaboration are both key to success here, and Europe has a positive history of being an early adopter of such trends. For example, work has already begun in Newcastle, UK on GE’s four high pressure, high temperature dynamic flexible risers. Furthermore, French LNG company, Total, are increasing their investment in major sites globally, with any delay being due to the current high costs. That said, major companies such as Total still have the financial clout to back large-scale projects, regardless of the variance in the oil price, although clearly it makes sound business sense to wait until costs are low to invest.
The LNG market is only going to grow, and Europe will not be left behind. What needs to happen is for both buyers and suppliers to work together to drive down costs to make sure new projects get the green light and are in place to meet the expected surge in demand for LNG.
Join the Conversation: Do you agree with Richard? What’s the impact of the growing Asian LNG market on Europe? Leave a comment below.
Interested in discussing the role of gas in Europe? The European Autumn Gas Conference (EAGC) will explore key micro commercial, strategic and political influences which are driving the EU natural gas and LNG agenda, such as the critical drivers for supply diversification and the immediate term security of demand opportunities. View the conference agenda.
More on Europe’s gas and LNG:
Sed do eiusmod tempor incididunt ut labore et dolore magna aliqua.