The Institute of Energy Economics Japan (IEEJ) in Tokyo and the Energy Policy Research Foundation, Inc. (EPRINC) in Washington DC have hosted an in-person workshop on December 15-16, 2022 in Washington, DC. The workshop, Global LNG, Energy Security, and the Transition, brought together a small group of policymakers, practitioners, and experts from the U.S., Asia, and Europe to chart a path forward to address fundamental challenges of meeting rising global requirements for LNG, new threats to energy security, and measures to cost-effectively address the challenges of the energy transition. The workshop supported the six-year joint effort of IEEJ and EPRINC on the role of LNG in sustaining global energy security and worldwide requirements for new energy supplies.

Background

Prior to the Russian invasion of Ukraine, world energy markets were experiencing sustained shortages and rising prices from years of underinvestment in oil and natural gas production. Today, pricing pressure on LNG continues to rise well above historic trends from rising demand in Europe as the continent searches for alternative sources to replace lost supplies from Russia. Of special concern in the current market environment for Asia is the severe cost constraints in using LNG. The rapidly rising cost of LNG is especially troublesome for the developing world in Asia as sustained high prices will incentivize continued reliance on coal and petroleum liquids. High prices for LNG will undermine initiatives throughout Asia to pursue Net-Zero aspirations.

Securing adequate new supplies of LNG for the world market requires overcoming a series of unique financial, policy, and regulatory challenges. LNG projects require large-scale financial commitments binding sellers and buyers for much as 20 years for projects to reach final investment decision. In many cases, aspirational goals seeking to abandon so-called legacy fuels and leap directly to the renewable fuels and low carbon technologies of the future can be counter-productive and undermine long-term progress to Net-Zero outcomes. The energy transition will be both long and difficult. LNG and natural gas offer numerous opportunities for both the developed and developing world to enhance energy security, accelerate the transition away from coal, and make substantial progress in achieving lower carbon emissions. International financial institutions, public financial institutions and private banks will have to work together to ensure that LNG development can proceed with adequate long-term commitments and sufficient investment to bring substantial volumes of new supplies to the market.

Venue and Discussion Topics

Our excellent venue, the Cosmos Club, permitted extensive opportunities to discuss the broad challenges of energy supply and geopolitical stress points. We identified five subject areas to focus the panel presentations and discussions. These were:

1. LNG’s Role in World Energy Supply; Now and in the Future
2. Addressing Policy Obstacles and ESG Challenges in Bringing New LNG Supplies to Market
3. The Role of Public and Private Financial Institutions in LNG Production
4. Asian Energy Security and the Energy Transition – How the Asian Economies Adjust to the New Price Environment and Security Threats
5. What Advice Should We Give to the G7 for Next Year

Additionally, EPRINC and the Embassy of Japan in Washington DC cohosted a dinner to facilitate more discussion between participants the evening of December 15.

The presentations from the workshop can be downloaded from this link, the agenda from the workshop is here, and photos from the two day event are here.

EPRINC Fellow Tristan Abbey has written this open letter titled “Did Biden Break the Strategic Petroleum Reserve?” The letter was sent on October 27, 2022 to Senators Joe Manchin and John Barrasso, chairman and ranking member, respectively, of the U.S. Senate Committee on Energy and Natural Resources.

The letter calls for a bipartisan investigation into the operational impacts of the White House’s “historic 180-million-barrel drawdown” focusing on the following quetisons:

1. Have maintenance requirements — well remediation, cavern closure, pipeline and pump replacements, etc. — increased as a result of the drawdown?
2. Have any caverns collapsed or been closed temporarily or permanently as a result of the drawdown? Does the administration intend to close down any caverns or sites as a result of the SPR’s depletion? If so, which ones and over what time period?
3. What is the current status of Life Extension II, the long-awaited $1.4 billion modernization program? Has it fallen further behind schedule?
4. If the administration does refill the SPR, will the construction of new caverns and other infrastructure be required? Will an equal volume of oil be bought that was sold?

EPRINC President Lucian Pugliaresi has co-authored an article published on October 25, 2022 in RealClear Energy entitled “Bad Energy Policy Ideas Never Die“. In it, they discuss their concerns with recent public policies related to energy that have been proven to be major issues that will be difficult to recover from. A quote from the article with their proposed solution is below:

“To the fearful leaders in our country: step out on your turf and support the domestic oil and gas industries in ways that will build investor confidence and calm markets. There simply is no other way to meet the future without a strong domestic base for energy and materials. Others will take note, including troublemakers we face now and those we’ll face in the future.”

https://www.realclearenergy.org/articles/2022/10/25/bad_energy_policy_ideas_never_die_860905.html

China has emerged as a key player in the global natural gas market in the past decade, surpassing Japan as the top natural gas importer and the largest LNG importer in 2018 and 2021, respectively. China’s role in determining Asian natural gas trends—especially, gas pricing and LNG trade—is increasingly important as the country looks to replace greater volumes of coal with natural gas to implement its programs to reduce local air pollution. As part of EPRINC’s China Series, this publication evaluates market and policy trends in China and projects the country’s natural gas and LNG demand through 2030.