Global LNG: All Sold Out // Green Doubts In Colombia // The DOE's $13 Billion Transmission Fund

Global LNG: All Sold Out

Japan's ringing the alarm bell: competition for natural gas over the next three years will ramp up due to underinvestment. 

"Long-term LNG contracts that start before 2026 are sold out, according to a survey of Japanese companies conducted by the trade ministry and released Monday," reports Bloomberg. "These types of contracts are essential for buyers, as they offer stable pricing and reliable supply for many years."

The world is gobbling up natural gas from Qatar and America. Europe is also trying to replace Russian gas flows. "If Russian pipeline gas to Europe is cut completely, the world could see a shortage of 7.6 million tons of LNG in January 2025, equivalent to one month’s worth of imports to Japan, according to the document," reports Bloomberg. 

So, the world has flocked to the spot market for natural gas which is both more volatile and more expensive--it's currently trading 3x higher than long term contracts. Last year, nearly a third of all LNG deliveries came from the spot market. 

So, when does more production come online? Not until 2026. A tight market appears locked in for the next few years. 

Green Doubts In Colombia

Leftist Colombian President Gustavo Petro made a campaign promise to stop new oil and gas exploration licensing in the country. Now the government's reconsidering.

Finance Minister Jose Ocampo told the Financial Times that they weren't going to suspend any oil and gas licensing until they can wrap their heads around the impacts. “Then we will see if new contracts are necessary,” Ocampo said. Half of Colombia's export revenues come from coal and oil. 

"There is growing apprehension in Colombia that President Petro’s plan to end contracting for oil and gas exploration will endanger Colombia’s energy security and trigger a crisis that could roil the economy," reports Oilprice.com. "A shortage of natural gas due to declining output from rapidly aging mature offshore fields, coupled with steadily rising demand, poses the greatest threat to energy security. Natural gas is an essential part of Colombia’s overall energy mix, providing 28% of all energy consumed in the country."

If Petro does pull his punches, it suggests the energy crisis's demands for pragmatism are having a salutary effect on those who once raised the all-renewables energy transition as their battle standard. 

The DOE's $13 Billion Transmission Fund

The Department of Energy is opening up its $13 billion fund for transmission projects to applicants. 

About 70% of America's transmission lines are more than a quarter century old, some of which have caused wildfires in places like California. An upgrade to transmission lines is sorely needed.

"There is $10.5 billion available for competitive grants under DOE’s Grid Resilience and Innovation Partnership, or GRIP, programs and $2.5 billion through the Transmission Facilitation Program," reports Utility Dive. The White House claims that all told the projects “represent the largest single direct federal investment in critical transmission and distribution infrastructure."

Unfortunately, the smallest portion of the money--$2.5 billion--is set aside for grid resilience. The rest of the money is for smart grid grants ($3 billion) and "grid innovation efforts" ($5 billion).

It's not clear how "smart grids" and "innovation" will solve the basic problems of over-investing in intermittent technology like wind and solar. The Department of Energy believes it needs to grow the transmission system 60% by 2030 and may even need to triple electricity capacity by 2050 to hit its climate goals. These incredible targets are a product of the ideological commitment to renewables. 

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Conversation Starters

1. The Department of Energy has decided to give PG&E $1 billion to keep the Diablo Canyon nuclear power plant running. "The Diablo Canyon plant is currently scheduled to shut down in two phases, with the first reactor going offline in 2024 and the second in 2025. But Gov. Gavin Newsom has led a spirited push to keep the reactors humming another five years, saying they’re badly needed to help the Golden State grapple with power shortages and worsening heat waves," reports the LA Times. 

2. Germany's LNG terminals are going to cost quite a bit more than expected. "The purchase and maintenance of floating liquefied natural gas (LNG) terminals to help Germany secure energy supplies and diversify away from Russian gas, will cost more than 3 billion euros ($3.10 billion) more than planned, the economy ministry said on Sunday," reports Reuters. "Overall, the costs are estimated at about 6.56 billion euros, the ministry said, confirming a report in Der Spiegel. That compares with 2.94 billion euros estimated in the country's 2022 budget."

3. The world is on track to see a record emissions uptick from coal-fire power plants. "Coal generation needs to fall precipitously for the planet to have a chance at reaching net-zero emissions. But 2022 has seen rising coal generation in Europe and India, as both regions struggled with the fallout of Russia’s invasion of Ukraine. Global coal generation likely would be even higher if not for an economic lull in China, the world’s largest coal market. The United States is the sole major economy to continue to see sharp declines in coal use," reports E&E News. "The figures highlight a difficult truth for the world’s climate efforts: While the fuel’s decline in the United States and Europe over the last decade has generated a tidal wave of headlines, global coal use has remained largely flat due to a growing fleet of coal plants in Asia."

Crom's Blessing