Page 7 - AsianOil Week 40 2021

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become increasingly harder to meet additional 139.1mn tpy of planned new liquefaction capac-
demand. ity is set to come online in this year.
The situation is increasingly putting Asia And there may be longer-term challenges to
into competition with Europe for LNG supplies. contend with, according to Tellurian’s executive
Indeed, European gas prices are also climbing as chairman, Charif Souki. The global shift away
gas companies on the continent try to restock from fossil fuels towards greener energy supplies
depleted inventories. JKM’s premium over the had slowed investment in LNG infrastructure,
Title Transfer Facility (TTF) benchmark price he warned recently.
in Europe has narrowed, also pointing to inten- “The world was kind of lulled to compla-
sifying competition. cency because prices were low for five years, so
“Competition with Europe will persist,” BCA no one felt an urge to plan and everyone got very
Research’s chief commodity and energy strate- religious on environmental protection and it is
gist, Robert Ryan, was quoted by Bloomberg as wonderful – we should be – but we should look
saying. “Asia successfully pulled cargoes over last at what things actually work rather than simply
winter by hiking prices to $32 [per mmBtu] lev- what we hope for,” Souki was quoted by Reuters
els and may well have to do that now to attract as saying.
supply. There’s also the possibility that this still Potential consequences of the LNG price
isn’t enough and governments in China and spike – especially on top of last winter – include
elsewhere could start ordering factories to shut buyers rethinking their reliance on the spot
down to conserve power.” market. Interest in new long-term contracts has
Traders already expect China to continue already risen in recent months and could grow
spot LNG purchases over the next few weeks, further still. Last year, the spot market accounted
according to Bloomberg, which is anticipated to for around 35% of global LNG imports, accord-
push prices even higher than they are currently ing to the International Group of Liquefied Nat-
as the market continues to tighten. ural Gas Importers (GIIGNL).
The price increases could also serve as a set-
What next back to the uptake of LNG as a marine fuel. This
A new wave of liquefaction capacity is under week, OPEC warned in its World Oil Outlook
construction, but not enough is due to come 2021-2045 that the shipping industry was at
online in the short term to provide immediate a “technology crossroads” and that rising gas
relief. According to the International Gas Union prices had resulted in the cancellation of some
(IGU), only 8.9mn tonnes per year out of a total LNG-fuelled vessel orders.™

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