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Fall in gas prices widens LNG market

Hello from London today, where a long heatwave appears to be coming to an end. While the temperatures here don’t quite rival the Texas heat that Myles has been experiencing recently, the heat in London can be much harder for the city to cope with — there’s no air conditioning. These aren’t isolated incidents either: the first days of June were the hottest on record globally in fact.

But let’s cool down and take a look at the stories today. In our first dispatch, my colleague Shotaro Tani examines how lower natural gas prices, along with efforts to quit coal, are giving birth to a new generation of LNG importers. The Philippines, Hong Kong and Vietnam are all taking their very first LNG shipments this year. Meanwhile in Data Drill, Amanda looks at an under-examined factor that could hold back the energy transition: a shortage of electricians.

Elsewhere in the FT, my colleague Tom Wilson scored an interview with the new Shell CEO Wael Sawan (ES covered their investor day here). Sawan told Wilson his main goal is “to be able to generate long-term value” for shareholders, and expressed disapproval about making investment decisions based on principles rather than returns. “The answer cannot be, ‘I am going to invest [in clean energy projects] and have poor returns and that’s going to vindicate my conscience’. That’s wrong,” he said. Read the full interview.

Thanks for reading. — Leslie

Lower gas prices breed new LNG importers

The fall in global gas prices this year has allowed new countries and regions to become first-time LNG importers.

It’s a sign that the appetite for the seaborne molecules remains high despite last year’s record prices, and the more affordable LNG is giving developing countries such as the Philippines and Vietnam the chance to reduce their reliance on dirtier coal.

Already this year:

  • The Philippines received its first cargo in mid-April, delivered by commodity trader Vitol, to provide fuel to local power company San Miguel Global Power.

  • Hong Kong received its first cargo in mid-May from PetroChina to support local power generators Hong Kong Electric and Castle Peak Power.

  • Vietnam is set to receive its first cargo from Shell in the coming months to test run its Thi Vai LNG Terminal.

“Traders are looking to new importers as a source of demand growth this year” amid lower demand from Europe and China, according to Alex Froley, senior LNG analyst at ICIS.

“Current lower spot gas prices are more affordable for newer importers, particularly cities looking to fuel cleaner power generation and replace declining local gas production,” he said. ICIS reckons Senegal and Ghana could also start importing the super-chilled fuel in the not so distant future, if prices remain low.

They had planned to enter the global LNG market earlier, but the moves were delayed initially by Covid-19 supply chain disruptions, and more recently, sky-high prices brought about by Europe’s pivot to LNG last year to replace Russian pipeline gas.

At the height of the energy crisis last summer, the price of LNG in north-west Europe reached $78.15/mmbtu, as assessed by price reporting agency Argus. North-east Asian prices reached $72.13/mmbtu, and south-east Asian prices hit $63.64/mmbtu, all record highs. Now they are all around $10/mmbtu.

While there are still concerns lingering over Europe’s gas supplies this year — highlighted by recent volatility of the benchmark TTF price — the EU’s gas storage is more than 70 per cent full, unusually high for this time of year. The consensus among traders seems to be that the bloc is likely to have enough gas for this year. That means LNG prices should remain well below last year’s levels, continuing to making it more affordable for new importers.

But a move into LNG market comes with a risk that the energy security of the new importers will increasingly be exposed to the movements of major importers such as Europe, Japan and China.

One only needs to look at last year; unable to outbid Europe for LNG cargoes, countries like Pakistan and Bangladesh experienced widespread power outages, as well as a return to coal for power generation.

The global LNG market is set to remain tight until the middle of the decade, when new projects in the US and Qatar will significantly boost supplies. Until then, new importers will need to chart a careful strategy. And major LNG importers such as Europe too, should be mindful of the effects its demand will have on the developing world. (Shotaro Tani)

Data Drill

A shortage of electricians is threatening to slow the US clean energy boom.

Rewiring America, a non-profit, estimates the US will need 1mn more electricians over the next decade to meet the clean energy demand spurred by the landmark Inflation Reduction Act. The US Bureau of Labor Statistics expects nearly 80,000 new electrician jobs annually over the next decade, slightly higher growth than the economy-wide average.

The surge in electrician job openings will be difficult to meet, say industry members and analysts, citing years of under-investment in trade work and a “greying out” of the existing workforce as more workers near retirement age.

“This generational handing down of the building trades from Bobby O’Malley to Timmy O’Malley to Johnny O’Malley — that’s gone,” said Tracy Price, an electrician and chief executive of Qmerit, an electrical installation company.

As of May, the average annual salary for an electrician was $65,280, about 5 per cent higher than nationwide estimates, according to the BLS.

Alexandria Herr, a research associate at Rewiring America, said investing in apprenticeship programmes and partnerships with high schools and community colleges can help encourage more students to enter the electrical workforce. Tapping into under-represented demographics such as women can also help close the labour gap.

“There is a need and a demand to invest in our labour pipeline,” Herr said. “If we don’t have people to do the work, we’re going to experience delays.” (Amanda Chu)

Power Points

Energy Source is written and edited by Derek Brower, Myles McCormick, Amanda Chu and Emily Goldberg. Reach us at energy.source@ft.com and follow us on Twitter at @FTEnergy. Catch up on past editions of the newsletter here.

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