DECORAH, Iowa — The current war in Ukraine has disrupted supply chains in energy and food. Countries have expressed their concerns for energy security and shortages in fossil fuels. This is the case for both European countries but also for developing countries which all receive their energy supply from Russia. This disruption in energy supply has created a rush to secure supplies. The growing LNG market has led to the demand for LNG being higher than its supply.
What is LNG?
Liquefied natural gas (LNG) is a type of fossil fuel. To form liquefied fossil gas, fossil gas is supercooled to its liquid state of -260°Fahrenheit (-160℃). Once in its liquid state, LNG is loaded on tanker ships or trucks and exported. Once exported it is brought back to its gaseous state and can be transported through pipelines, burned in home boilers and can be used in industries. LNG is one of the cleanest fossil fuels and people use it in various industries like food service, production and electricity generation. It also consumes low energy and consumers use it for heating and cooking.
Underinvestment in Supply
Some of the biggest exports of LNG are from Australia, Qatar and the United States. But only the United States and Australia increased their LNG exports in 2020. Because demand for gas has increased, amid the shortage in supply from Russia, gas prices have spiked. However, the shortage in gas supply is a global problem. There are gas fields in Argentina, Pakistan, Thailand, India and Chile that have experienced declines in output due to reduced investment. The high demand for gas goes beyond Europe. Due to the high prices in Europe, demand has decreased in LNG-importing countries. Europe ends up receiving LNG cargo that was initially destined for developing countries. This LNG cargo then enters a well-integrated European pipeline network connecting most countries in the European Union. On the other hand, developing countries are starved of much-needed gas.
Reducing Energy Poverty with LNG
Now, African and Asian markets need a new supply. As one of the world’s biggest LNG exporters, Qatar is looking to become Europe’s new supplier of gas. It has already signed deals with European energy companies to expand its LNG supply.
For African countries, domestic markets could be the solution to the supply shortage of gas. Tanzania, Nigeria, Algeria and Mozambique have large gas reserves in Africa and are big exporters of LNG. Unfortunately, gas discovery in sub-Saharan Africa takes an average of 15 years to reach the first production.
An important challenge to LNG investment and supply in Africa is security. This directs African countries to turn to LNG imports due to their concerns about the security of supply. Other complications are shortages in infrastructure or interruptions which have prevented Nigeria from supplying gas to Ghana through the West Africa Gas Pipeline.
Africa needs energy now more than ever. Over 600 million people in sub-Saharan Africa have no access to electricity. According to Dr. Ben Asante, CEO of Ghana Gas, LNG is a cost-effective solution to address energy poverty in Africa.
Currently, the growing LNG market has led to a number of LNG projects addressing energy poverty in Africa. One of them, Area 1, is a $20 billion project that the energy company, TotalEnergies, is developing in offshore Mozambique. This project will satisfy domestic gas consumption and supply gas for LNG exports to Europe and Asia. Mozambique LNG Area 1 project will develop the country’s industry. According to The African Development Bank, this project will contribute about $67 billion to Mozambique’s GDP. This project will also generate about 5,000 jobs for the construction of the LNG facility with the first LNG cargo expected in 2024.
The disruption of the global energy supply has exposed important facts about energy security. Demand has surpassed supply which has led to high energy prices across the world. First, this global energy shortage sheds the spotlight on energy poverty and how vulnerable energy security is worldwide.
According to the U.N., over 1.1 billion people globally have no access to electricity while 600 million people in Africa lack access to the grid. Second, the growing LNG market has shown how natural gas is a cost-effective solution to energy poverty. LNG is not only a clean fossil fuel but is also easy to transport through either pipelines, tanker ships or trucks making it accessible worldwide.
– Hans Harelimana Hirwa