Europe has no way of supplying the gas it buys from Russia, 40% of the total. As the eurozone is dependent on the outside due to the lack of raw materials and substitution through renewable energies is not expected in the short term, it is necessary to cover the quota of natural gas by seeking suppliers in other regions beyond Europe, which neither produces nor half of the gas you consume. Thus, the further away it is sought, the more it costs to transport it in an environment where Dutch TTF gas futures are above $103 per megawatt hour.
Although Spain’s proximity to Algeria, the great African gas exchange, has made it possible to reduce exposure to Russian exports, the truth is that it is not enough to complete the quota. In fact, according to the Enagás purchasing report for February, the The main importer of gas was the United States. Thus, our country bought the equivalent of 12,474 gigawatts per hour from the United States (more than 30% of the total in that month), compared to the 8,800 it bought from Algeria.
The United States may become Europe’s main beneficiary if Russia decides to turn off the gas tap completely. The North American country will produce in 2022 around 985,000 million cubic meters of gas, according to projections made by the International Energy Agency (IEA). This represents 23.7% of total world production compared to 18%, according to the agency, for the estimated production of Russia.
Latin American reserves
However, not only does production count to know where Spain, and the rest of Europe, can buy gas in the event that the situation becomes more complicated for the Old Continent. Although the extraction and inventory of the countries located in Central and South America cannot stand up to the almighty United States, the truth is that most of these countries have a net balance in favor of oil and gas. That is, they extract more than they consume in the country. At this point, the reserves of this region may be the ally that Europe needs until it completes its energy transition plan.
Without a doubt, Venezuela is the great gas deposit south of the Caribbean Sea above 6 billion cubic meters of gas, according to the latest data provided by Bloomberg. In fact, according to data from the Organization of Petroleum Exporting Countries (OPEC), Venezuela’s proven reserves would place the country as the eighth in the global calculation.
In fact, their reserves are almost four times those of the rest of the Latin American countries with natural gas. With the latest available data, at the end of 2020, the production capacity on Venezuelan territory exceeded 27,000 million cubic meters.
The next in inventories would be Brazil, which according to the country’s National Agency for Petroleum, Natural Gas and Biofuels (ANP), during 2021 there was a natural gas production record, by increasing it by 5% compared to the previous year. Thus, according to the institution, the daily average during the past year was 134 cubic meters.
The third to close the podium would be Argentina, whose average daily extraction is among the highest in Latin America, although this does not mean that it has more resources or greater extraction capacity in the territories of its neighbors. Other countries such as Peru or Trinidad and Tobago are around the 300,000 million cubic meters of natural gas, the small island republic being relevant for the activity that Repsol maintains in its waters.
According to the Institute of International Finance (IIF, for its acronym in English), the increase in the prices of raw materials will have a positive effect on this entire region of the planet due to high dependency that exists in the global demand for the resources available to these countries, and especially Argentina, Colombia, Brazil, Chile and Peru would be favored.
In the report, they highlight the example of countries such as Colombia or Brazil, due to their positive balance between fuel imports and exports (in favor of imports). According to the IIF, for every $10 increase in the price of fuel in the world, the Colombia’s GDP increases by 0.7%. In the case of Brazil, this percentage falls to 0.2% of its gross domestic product, given that in the gas market the country consumes more than it obtains from its fields.
USA is relevant
There is no gas pipeline that crosses the Atlantic Ocean, so bringing natural gas from America involves transportation by liquefying boats the element, for ease and for lower costs. Even so, transportation by gas pipeline is, on average, cheaper than transporting it by methane tanker. As an example, as already mentioned in the Economist, the price of the liquefied natural gas that arrived from the United States to Spain in January was paid on average at 53.88 euros per megawatt hour compared to that which arrived channeled from Russia, which cost 38.42 euros/MWh. That is, 40% cheaper in the case of the gas pipeline, according to data from GasIndustrial.
“Last month [en referencia a febrero] 7.15 million tons of liquefied gas were exported from the US in 106 ships and half to Europe,” according to abrdn’s director of strategy, Robert Minter. However, the expert estimates that reinforcements coming from the US they only supply a third of the European needs covered by Russia, so far, for which he understands that “more facilities are needed to import liquefied gas in greater volume,” according to Minter.
The price of oil and gas may subtract half a point from GDP this year
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