As Europe seeks to import liquefied natural gas to fill the gap left by Russia, new sources of supply may be ready after winter.
Straddling the maritime border between Senegal and Mauritania, the Grande Tortue Ahmeyim is a development that could produce up to 2.5 million tons of LNG per year. Indeed, given the demand, the project remains relatively small, but it is only a two-week journey from Europe. However, local issues have pushed the project to next year. This delay comes amid increasing nervousness in the global LNG market.
Europe has a massive appetite for this fuel because most Russian pipelines that have heated its homes and fueled its industries for decades remain closed.
Volatility has returned, with the threat of strikes at major LNG facilities in Australia causing price fluctuations of up to 40% last month. Chevron’s liquefied natural gas workers in Australia began partial strikes on Friday after negotiations failed to reach an agreement in a conflict shaking global gas markets.
European gas reference prices surged by up to 11% following this news, highlighting the market’s vulnerability after last year’s energy crisis.
According to BP, Tortue is now expected to start gas production in the first quarter of next year. It typically takes about three months to go from the first gas to the first LNG. This would allow the first shipment to be delivered by mid-2024.
Despite the delays and the fact that Tortue’s production will represent only a tiny fraction of the 96 million tons of fuel imported by Europe last year, any new source of LNG supply without a contract is welcome. Tortue’s Atlantic location makes Europe the natural export route. Senegal has already announced that it will sell its share of Tortue LNG to Europe in the second half of next year. This commitment came after European officials and German Chancellor Olaf Scholz visited Dakar to pursue gas and renewable energy projects.
The impact of the strikes in Australia on LNG shipments is likely to take time. Gas consumption is currently moderate in Europe and Asia. Nevertheless, the prospect of disruptions to future supply has driven up prices, as it threatens greater competition for shipments during the peak winter demand in the Northern Hemisphere. Europe in this market will compete with Asia, which could trigger a price war this winter. A new price hike could be detrimental to the already heavily pressured German manufacturing sector.