Blog
Sept. 21, 2023
Diversity of supply - your key to energy security
- A diversified energy portfolio is essential to ensuring energy security.
- Diversity of sources and supplies offers insurance against supply disruptions and other hazards.
- Asia's recent embrace of LNG provides a security roadmap other regions should follow.
Blog
Sept. 21, 2023
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“Diversify”
Every financial advisor will tell you a diversified portfolio is essential to protecting your financial future. It could mean the difference between losing your life savings or living on Easy Street.
The same principle holds true when it comes to energy. Diversified sources and supplies are absolutely critical to ensuring regional and even global energy security. When you don’t have diversification, whether in terms of energy supply or in your financial portfolio, real people stand to be negatively affected.
"Diversified sources and supplies are absolutely critical to ensuring regional and even global energy security."
That was a message I delivered in Singapore recently at Gastech 2023, one of the LNG industry’s premier annual gatherings.
When it comes to the types of energy a country uses, or the source of those supplies, diversity acts as insurance against the negative effects of inflation, supply disruption or other problems energy consumers might face.
It is key to avoiding the pains of world affairs – whether natural disasters like hurricanes or man-made ones that can stem from the geopolitical movements of rival nations.
Russia: Europe’s case for change
Let’s dive deeper into that second point.
The past
18 months
millions of consumers
vulnerable to a potential disruption in supplies.
The rapid reduction in Russia’s exports in the wake of its invasion of Ukraine left European nations with no other option than to purchase natural gas from the spot market. Energy prices increased rapidly.
European environmental goals took a hit, too. With renewables unable to fill the energy supply gap and to make sure the lights and heat stayed on during winter, European countries began restarting many coal-fired power plants that had been mothballed in the interest of cleaner air and lower greenhouse gas emissions. This return to coal threatens to reverse the significant emission-reduction benefits of the switch to natural gas in the first place.
Much of this turmoil may have been avoided if Europe had greater diversification of energy sources and providers.
European environmental goals took a hit, too. With renewables unable to fill the energy supply gap and to make sure the lights and heat stayed on during winter, European countries began restarting many coal-fired power plants that had been mothballed in the interest of cleaner air and lower greenhouse gas emissions. This return to coal threatens to reverse the significant emission-reduction benefits of the switch to natural gas in the first place.
Much of this turmoil may have been avoided if Europe had greater diversification of energy sources and providers.
European environmental goals took a hit, too. With renewables unable to fill the energy supply gap and to make sure the lights and heat stayed on during winter, European countries began restarting many coal-fired power plants that had been mothballed in the interest of cleaner air and lower greenhouse gas emissions. This return to coal threatens to reverse the significant emission-reduction benefits of the switch to natural gas in the first place.
Much of this turmoil may have been avoided if Europe had greater diversification of energy sources and providers.
Diversifying with LNG
Encouraging the construction of LNG import terminals to receive shipments of liquefied natural gas likely would have provided important opportunities for diversity and security of supply. Such diversity could have kept Europe connected to other options.
It’s worth noting that over the past few decades, the countries of the Asia-Pacific region took a different approach. They grew their ability to import LNG, significantly reducing their vulnerability to supply disruptions and keeping them connected to diverse supply. After all, LNG can be shipped from almost anywhere in the world.
And many countries signed stable, long-term contracts with trusted suppliers – connections that further enhance the ability to protect their citizens and their economies.
Singapore is a prime example. Almost all of Singapore’s electricity comes from natural gas, most supplied by pipeline from Malaysia or Indonesia, with LNG supplying roughly a third of the total supply.
But if something were to happen to those pipelines, or to those sources of supply, Singapore is positioned to import additional LNG. And that gas could come from anywhere, whether Qatar, Australia, or Papua New Guinea … or from the United States or Mozambique.
Such is the beauty of diversification; when it comes to natural gas, Singapore and its Asia-Pacific neighbors have taken affirmative steps to ensure greater energy security.
I believe that more nations around the world would be wise to follow their example. From a geopolitical standpoint, it is a smart investment to make.
At ExxonMobil, we offer geographically diverse, flexible, reliable, and lower-carbon LNG from our global portfolio. In essence, diversification is what we deliver.
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