Page 5 - GLNG Week 33 2022

GLNG COMMENTARY GLNG

Europe pays spiralling LNG

prices to fill storages

COMMMENTARY EUROPE’S efforts to fill its gas reserves ahead is now falling down the energy agenda, as gov-
of the coming winter could come with a hefty ernments buy gas at whatever price to meet
price tag, as global LNG price have reached up demand in the coming months.
to 10 times their normal levels as the continent The is all bad news for the EU’s Green Deal,
scrambles for available cargoes. and more gas consumption in the power gen-
The UK, which has little gas storage capacity, eration, especially with some coal now being
has bought its first cargo from Australia for the burned in Germany, means that the continent’s
first time in six years as Europe’s importers scour emissions could rise.
the globe for available volumes and are willing to This spells danger for Brussels’ efforts to cut
pay record-high prices. emissions by 55% by 2030, and could make
Meanwhile, EU member states have filled meeting 2050 net-zero targets more difficult if
their gas storage facilities to close to 75% capac- and when the current gas crisis passes.
ity, equivalent to 75bn cubic metres. This is just Germany is also considering postponing the
5% short of the EU’s policy of having its storage closure of its remaining three nuclear reactors as
sites 80% full by November 1 as part of Brussels’ the energy crisis digs in.
led efforts to create a united front to combat cuts Among the options available for sourcing
in Russian gas imports. LNG are Asia and Qatar, but both come at a cost
European gas buyers have now almost filled and high risk.
the storage facilities well ahead of Brussels’ European countries are now scrambling for
November 1 deadline, but at considerably high new supply. Germany has signed a memoran-
prices. dum of understanding (MoU) with importers
On August 18, futures at the Dutch TTF gas Uniper, RWE, EnBW and VNG to ensure that
hub reached €230.05 per MWh ($2,844 per 1,000 the country’s two new FSRUs at Brunsbuettel
cubic metres), up from €220 per MWh ($2,720 and Wilhelmshaven are fully supplied from
per 1,000 cubic metres) on August 16. This was their expected operational start this winter until
up from €202 per MWh ($2,200 per 1,000 cubic March 2024, Reuters reported.
metres) on July 26. The two FSRUs will allow Germany to receive
All this means prices have doubled even from 12.5 bcm of LNG per year, equivalent to about
June’s highs and are over 10 times normal levels. 13% of the country’s gas consumption in 2021,
Gazprom meanwhile said that prices could according to Enerdata.
spike a further 60% from current levels in the Part of an LNG cargo from Australia’s North
coming winter, imposing more pain on Euro- West Shelf project was transhipped in Malaysia
pean consumers. It said they could exceed before travelling to the UK, Bloomberg reported.
$4,000 per 1,000 cubic metres this winter. This Mathew Ang, an analyst at Kpler, told
means that any gas that does come from Russia Bloomberg that the Attalos LNG tanker received
to Europe could be even more expensive than the partial LNG cargo from the Patris tanker
LNG. in Malaysia in July. Before that, the Patris had
Russian gas supply remains significantly con- loaded at Australia’s North West Shelf, where
strined, having slumped to an all-time monthly BP has capacity. The rest of the cargo went on to
low of 3.6 bcm in July, down 23% from the previ- South Korea.
ous low registered in June. The vessel will arrive at the Isle of Grain ter-
The result is that European buyers are pay- minal in the UK on August 22, according to
ingthrough the nose for LNG on global spot ship-tracking data.
markets and must compete with Asian buyers. Alongside Australia, Qatar is another major
Closer LNG exporters in the US and Africa are source of LNG that Europe could turn to in its
already operating at full capacity, making global effort to replace Russian gas.
targets tight and driving up prices for spot LNG Russia sold 150 bcm to the EU in the form of
cargoes to crazy prices. pipeline gas and LNG in 2021, current projec-
Prices are no longer “normal,” and European tions see this figure falling to around 80 bcm in
buyers must still compete with Asia to secure 2022, with the 35 bcm sold to other European
cargoes. countries also likely to decline sharply, said
Asian spot LNG prices reached just below $60 James Henderson of the Oxford Institute for
permillion Btu on August 17 Wednesday, their Energy Studies (OIES).
highest level since early March. However, Qatar’s gas sector is already oper-
All this means that pursuing a green transi- ating close to capacity, Capital Economics said
tion or a green post-COVID economic recovery in a note.

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