Page 5 - GLNG Week 33 2021

GLNG COMMENTARY GLNG
It is possible, however, that conditions could improve towards the end of the year, assuming Asian demand eases and more supply enters the market as expected.
“As Asian demand peaks in the summer, demand will start to go down in the autumn, so finally Europe may attract some spot LNG back and this might give Europe a breather in Octo- ber,” a BCS Global Markets senior oil and gas analyst, Ronald Smith, told Bloomberg. “And if we have a very warm October we can keep injecting gas in storage sites.”
Meanwhile the news service cited traders as saying the price arbitrage between Europe and Asia for October deliveries had nearly closed, which could mean more cargoes heading to ter- minals in the Atlantic.
Even if these trends play out, however, ques- tions remain over whether it will be in time for European countries to refill their gas inventories before the winter sets in.
To the rescue?
One major factor that stands to bolster Europe’s gas supplies is the imminent start-up of the Nord Stream 2 pipeline from Russia to Germany. News outlet Deutsche Welle has reported, without pro- viding sources, that construction of the pipeline was set to be completed on August 23.
Neither Gazprom nor the Nord Stream 2 operating company have confirmed the date, but Gazprom said this week that the pipeline would ship 5.6bn cubic metres of gas this year. Various analysts including Moscow-based Vygon Consulting have estimated that this would require Nord Stream 2 to enter service in mid-October before ramping up deliveries over the winter.
However, while construction on Nord Stream
2 is around 99% complete, the pipeline would still need to obtain insurance and certification, and US sanctions remain in place that restrict would-be providers of these services to the project. Indeed, there has been speculation that Russia is deliberately reducing flows to Europe in order to make it easier to overcome the remaining hurdles for Nord Stream 2 in the face of a looming gas supply crunch.
“Nord Steam 2 supplies couldn’t come at a better time, with European gas stock shortages still down considerably year on year,” Bloomb- erg quoted DB Group’s head of operations and trading,TimPartridge,assaying.“Afullyopera- tional Nord Stream 2 may ease supply shortages in a calculated ‘white knight’ scenario. Russia cannot be seen to use energy as an economic or political weapon.”
However, even if Gazprom is able to bring Nord Stream 2 online in October, the initial volumes flowing on the pipeline may not be enough to ease the European supply crunch in time for the winter. This is especially the case as Russia could use the start-up of Nord Stream 2 as a reason to halt flows to Europe via Ukraine altogether.
A recent deal between the US and Germany that allows Nord Stream 2 to be completed despite the sanctions that remain includes an agreement to intervene if Russia uses the pipe- line to harm Ukraine. It is not clear, though, what this intervention would look like or how effective it would be.
Europe will have to hope that Nord Stream 2’s start-up will be coupled with a rise in LNG ship- ments to the continent. But while more LNG is indeed anticipated to flow to Europe from Octo- ber, this could quickly be undermined again by rising winter demand in Northeast Asia.™
Europe will have to hope that Nord Stream 2’s start-up will be coupled with a rise in LNG shipments to the continent.
Week 33 20•August•2021 w w w . N E W S B A S E . c o m
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