Joe Sigelman, CEO and chairman of AG&P, was speaking with Jasmine Melvin of the Capital Crude podcast on the role politics plays in the global energy sector. The global oil and gas supply chain continues to witness massive disruptions that are being precipitated by the ongoing Russian invasion of Ukraine. Most energy markets in Europe, Africa, and parts of Asia rely almost entirely on Russian gas and oil, so it was only natural that the invasion would precipitate volatility in the global energy sector. Joe Sigelman believes that Europe can shake off its dependency on Russia by building new LNG terminals that import LNG from outside the EU. That is why AG&P is fast-tracking its development of import terminals in Europe and Asia.
How Geopolitics Affect the Global Energy Sector
During the interview, Joe Sigelman acknowledged that without an apparent end in sight, Russia’s invasion of Ukraine will continue affecting energy prices in the foreseeable future. But what’s the future of LNG demand globally vis-à-vis the ongoing geopolitics? Joe argues that with Europe gravitating towards green fuel and trying to move away from coal, it is predictable that there will be a big spike in demand for LNG across the continent. LNG is a clean natural gas, it is readily available, and it is more affordable on large scale compared to renewable energy sources.
Despite the politics behind Russia’s invasion of Ukraine, Joe is optimistic that LNG will keep growing both in demand and supply. He mainly is optimistic about Qatar’s move to increase its LNG export capacity by 50% before 2025 and UAE’s move to add up to 10 million tons into the global LNG system by 2026. On its part, the United States seeks to inject an extra 100 million tons of LNG every year. Australia, Mozambique, and Tanzania are new entrants in the LNG market and are expected to cause significant disruptions going forward. For this reason, Joe predicts a giant increase of up to 60-100% of the current export volumes in the global LNG system.
With huge volumes of LNG entering the system, it is likely that the pricing for LNG will go down even if the war in Ukraine continues indefinitely. Joe predicts that increased supply and demand in the LNG sector will bring about the diversification of suppliers, especially in Europe and the US. This will make LNG prices more and more favorable for importers and, by extension, the end users. The diversification of importers will also lead to the diversification of the types of contracts that will be available for LNG companies. In Joe’s opinion, these positive changes are due to the shifting geopolitical landscape across Europe and parts of Asia.
Joe Sigelman’s AG&P is rapidly building the necessary infrastructure to support the global spike in the demand for clean fuel. The company already launched the first LNG import terminal for the entire Philippines. The terminal has a 5 million-ton capacity. The company’s clean energy initiative has already spread to 8% of India and it is still growing. Other LNG companies must build the infrastructure needed to bring the gas into underserved markets worldwide.
It would be wrong to view geopolitics as nothing more than the Russia-Ukraine crisis. Joe’s advice to LNG players is to see geopolitics as a long-term emphasis on decarbonizing our manufacturing and transport sectors. The ongoing energy transition in the global energy infrastructure forms a critical part of the geopolitics shaping the LNG sector. The geopolitical landscape stretches to conversations around climate change and the role of renewable energy sources in the achievement of a net-zero carbon future. Joe notes that renewables have glaring limitations that give LNG the upper hand in the whole global energy matrix.
The EU-USA Nexus
There is a US-EU Task Force on Energy Security that was formed in early 2022 to look into how the EU and the US can collaborate in their pursuit of a clean environment. The EU economic block banks on the US to provide it with an additional 15 billion cubic meters of LNG by the end of 2022. The US, on the other hand, expects the EU to create a stable demand for America’s LNG. The US intends to supply up to 50 BCM a year to Europe by 2030. That way, the EU will successfully cut down on its dependence on Russian energy supplies. Joe believes that America has the potential of not only being the largest LNG exporter in the world- which it already is- but also becoming the ultimate arbiter of global LNG pricing. America’s natural gas reserves have an abundance of gas that can satisfy the global market for many years to come.
America’s political will is going to determine whether or not the country is going to dominate the global LNG sector. President Joe Biden has been talking about his government’s intent to cut the greenhouse gas intensity of all new LNG infrastructure and pipelines. His argument here is that America needs to double down on clean energy investments and get off of unabated fossil fuels. How these pronouncements affect licensing for LNG companies in the US remains to be seen.
