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Editor’s Note: The following segment is one in a series by NGI’s LNG Insight focused on exploring how the global liquefied natural gas (LNG) market works. The conversations in this series will also analyze news and the issues that matter most to the industry in North America and beyond.
Anna Mikulska is a nonresident fellow in energy studies at Rice University's Baker Institute for Public Policy and a senior fellow at the University of Pennsylvania’s Kleinman Center for Energy Policy. Her research focuses on the geopolitics of natural gas within the European Union, former Soviet Bloc and Russia. Her current interests include the potential use of natural gas as a geoeconomic tool and investigating ways to leverage U.S. LNG exports to bolster European energy security. She received a law degree from Adam Mickiewicz University, a master’s degree in international relations from the University of Windsor in Canada, and a Ph.D. in political science from the University of Houston.
NGI: Despite the Covid-19 pandemic and its impact on energy consumption worldwide, why has LNG demand remained relatively stable?
Mikulska: We all need to understand that LNG is very different than oil. First of all, it is not used for transportation the way oil is and that sort of demand has been hurt very much by the virus. LNG is used to produce electricity and heat houses. Because of this, demand won’t be hit as hard as oil. When we stay home, we still need electricity, heating and cooling. That’s beneficial for natural gas.
NGI: LNG demand is still expected to grow this year and beyond. What parts of the world will drive that growth?
Mikulska: While Europe has continued to play a key role during the pandemic because of its location and storage capacity, what generally will drive LNG demand is Asia. Asia, specifically China, has been restarting its economy. And LNG demand there will likely grow. In fact, it has been growing during the pandemic; it just hasn’t grown at the rate it would have without Covid-19.
Record volumes of U.S. LNG have gone to Europe this year, but that isn’t likely to be the case in the coming months, as we’re already seeing cargo cancellations for June. We will hopefully see demand recover in the Asian economies like China, Japan and South Korea, and as they recover, they will need natural gas.