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  • Writer's pictureTony Zelinski

How North American natural gas could alleviate the global energy crisis

North America (the United States [US] and Canada) is endowed with significant natural gas resources that could play a key role in addressing three challenges that the global energy industry faces today. First, North America could provide affordable energy to help counter high prices across the US and Europe. Second, the region could provide energy security by exporting liquefied natural gas (LNG) to Europe, and third, natural gas could replace high-emission forms of energy to help advance the decarbonization agenda.

The region has the potential to provide this low-cost, alternative energy source—and it could be activated quickly. Greater collaboration—across the industry, regulators, and consumers—could unlock this potential. Stakeholders could develop North American gas infrastructure, support reliable gas supply, and commit to long-term offtake agreements.

These measures could reduce North American gas prices and facilitate increased exports, thereby maintaining North American energy independence and providing energy security.

Challenge 1: Inflation and affordable energy

Between July 2021 and July 2022, US natural gas prices at Henry Hub rose more than 250 percent, and European gas prices increased by almost 850 percent

Natural gas plays a key role in power generation and heating for buildings and is used as a feedstock and energy source in industrial processes. Consequently, higher natural gas prices contribute to rising prices for the fertilizer, steel, cement, plastic, and glass industries, and lead to immediate cost increases in electricity production.

The US experienced an 8.5 percent rise in consumer prices between July 2021 and July 2022, with energy prices accounting for around 30 percent of the price increases during this period.

Challenge 2: Energy security

Since February 2022, the war in Ukraine has had a profound human and socioeconomic impact across countries and industries.

The reduced supply of Russian pipeline gas into the European Union (EU) has brought energy security to the fore.

Consequently, European countries have slowed their coal-to-gas switching programs and, in some cases, reverted to using carbon-intense forms of energy such as coal or lignite due to a lack of reliable and secure natural gas feedstock.

Europe is implementing measures to strengthen energy security by diversifying away from Russian piped gas imports due to supply interruptions. Measures include building temporary and long-lasting infrastructure to import more LNG, accelerating renewables, supporting energy-efficiency programs, and delaying nuclear decommissioning.

This may result in a pull of an additional 80 billion cubic meters (bcm) of natural gas—equivalent to between 7 billion and 8 billion cubic feet per day (bcfd)—increasing North American LNG demand in the next three to five years.

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