The US has already played a key role in increasing supply to Europe in recent months. Therefore, this suggests that there is limited upside to the record LNG imports seen in January 2022 of around 12.9bcm (9.5mt) according to data from ICIS LNG Edge. One would expect that where there is flexibility, we are already seeing these flows directed to Europe, given the premium the market is trading to Asia. This leaves around 30% of trade that is done on spot or short-term contracts. As a result, this does significantly reduce the amount of available LNG that could make its way into Europe. In addition, around 70% of LNG trade is done under long term contracts, with a large part of these having strict destination clauses. If Russian pipeline flows were to be halted, it is likely that Russian LNG would also not make its way to Europe. It is the third-largest supplier to Europe after the US and Qatar. Russia is also a large LNG supplier to Europe, making up around 20% of total LNG imports. This competition will be even more aggressive given the limited spare capacity in the market. Ignoring import capacity constraints for now, the European market will need to compete aggressively with Asia for LNG supply. We can't assume that all necessary LNG supply can be diverted to Europe to meet any shortfallįurthermore, we cannot just assume that all necessary LNG supply can be diverted to Europe to meet any shortfall. Therefore, actual spare capacity is likely more limited than this number suggests. This suggests that some of these countries which are sitting on spare export capacity are either facing disruptions or there are issues with the availability of feed gas. Firstly, in the current price environment, if capacity were available operators would certainly be maxing out. However, it is safe to assume that not all this spare capacity is available. We estimate that spare capacity sits at around 125bcm and this includes export terminals which are set to ramp up over the course of this year.
Therefore, Europe will rely heavily on the LNG market to try to reduce a potential shortfall from a halt in Russian gas flows.Īt first glance, there does appear to be a fair amount of spare LNG capacity globally. It is clear that marginal increases in domestic production and limited increases in pipeline imports will fall well short of making up for Russian gas flows. LNG imports made up around 32% of total imports, whilst the remaining 16% includes supply from North Africa and Azerbaijan. In 2021, European gas imports totalled around 296bcm (Norway is included in European production), of which Russia was the largest contributor, making up 52% of this number. This means that almost 60% of European demand must be met by imports. European gas demand is estimated to total around 524bcm in 2021, leaving a domestic deficit of 310bcm. Total European output, including Norway and the UK, totalled around 214bcm in 2021.įalling domestic output over the years has meant that Europe relies increasingly on imports to meet domestic demand. The current gas year is expected to be the last operating year of the field. The production cap this year was 3.9bcm, although this will potentially be lifted to 7.6bcm. The Dutch government implemented a production cap which has been reduced over the year with the idea to do so until the field shuts. European gas production has fallen over the years, driven by a reduction in the production cap at the Groningen gas field in the Netherlands.
0 kommentar(er)
