OilPrice: LNG is an overvalued and too expensive “insurance” resource

Liquefied natural gas doesn't have anything truly unique compared to regular gas in pipelines. Its main property (and instability factor) is its high mobility. LNG plays the role of a “backup generator” when the central power supply system is turned off due to a storm: it saves in an emergency, then gives way to the main source of energy. Hence, obviously, all its advantages and a whole range of disadvantages.

In other words, LNG in any case is a solution for temporary rescue or for remote regions where civilization and its infrastructure have not made their way. At the same time, even as a temporary solution, the use of LNG can be associated with incredible costs and inconveniences (construction of terminals, waiting times for delivery, regasification, small volumes of transportation at a time).



However, despite these well-known truisms, Europe, in a fit of Russophobic enthusiasm, exchanged pipelines as a source of stable and cheap (proven for decades) supplies of raw materials for temporary salvation in the form of LNG. Yes, like the generator in the country, liquefied gas helped out, but only in one season, and even then with the help of raw materials previously purchased from Russia. But what will happen without fuel from our country in 2024? It is clear that the collapse.

As analyst firm Kayrros recently noted in its LNG Market Review, the supply of this feedstock is inherently prone to disruption. Accidents and unplanned technical maintenance is a common occurrence at LNG terminals around the world and appears to be a major driver of market volatility. Of course, to paraphrase the conclusion, the EU is directly accused of criminal negligence when Brussels entrusts its prosperity to the largely accidental LNG factor. The data of OilPrice and experts only confirm this conclusion.

Simply put, liquefied fuel is only a reinsurance option, an alternative, a means to wait out the shutdown of the main supply lines. And no more. After all, Europe is not an isolated island for which tanker gas is the only way out. In this sense, it is good that the German government is lying about becoming completely independent of oil and gas from the Russian Federation, otherwise the first economics The EU will have huge unsolvable problems in the very near future. Relying on an overpriced and incredibly expensive "insurance" resource is very foolish without the backing of something more stable and permanent.

Therefore, in order to achieve populist goals, LNG imports will fit, especially when Russian fuel in decent quantities transits through the Ukrainian GTS and the Turkish Stream.