Page 5 - EurOil Week 07 2021

EurOil COMMENTARY EurOil

The plant’s expansion is anticipated to be com- demand, while China went into lockdown in
pleted by the end of 2023. response to the coronavirus (COVID-19) out-
This will coincide with new supply coming break and sought to cancel some of its contracted
online in the US after 2022 – at which point cargoes.
PGNiG will be free of its obligations to Gaz- That year, much of the supply that would
prom. The company has long-term contracts to have gone to Asia found a home in European
buy US LNG, and once these come into force, its storage. This winter, however, European imports
portfolio is predicted to expand to roughly 9.3 declined by 55% y/y in January, according to
bcm per year of gas. PGNiG said LNG deliver- Tudor, Pickering, Holt & Co. (TPH). Over the
ies from Qatar – which just sanctioned its giant same month, TPH said Japan and China com-
LNG expansion project – would also continue bined consumed 50% of all LNG cargoes that
beyond 2022. were shipped.
PGNiG is also intending to increase pipe But Asian LNG spot prices are now soften-
shipments from outside Russia, with the Baltic ing, and as a result, US cargo loadings destined
Pipe project, which will carry Norwegian gas to for Asia have declined, while those bound for
Denmark and Poland, starting up in late 2022. Europe have rebounded, according to Goldman
Sachs Commodities Research. There have also
European trends been reports of vessels being diverted back to
PGNiG’s rising imports come as more and more Europe, according to comments from data intel-
LNG from a variety of sources is being shipped ligence firm Kpler in early February.
to Europe. Croatia’s Krk floating LNG (FLNG) However, cold weather persists in other parts
import terminal started up early this year, and of the world, including China, and this is thought
more receiving capacity is under construction to be keeping LNG supplies to Europe compar-
– notably in Greece, where the Alexandroupo- atively low. European levels of gas in storage are
lis FLNG project is scheduled to come online in also lower than normal as a result. Goldman
2023. Sachs analysts believe that low European storage
However, recent weeks have seen LNG vol- inventories “will have a lasting tightening impact
umes that would go to Europe disrupted and on European gas balances, and hence on global
redirected to Asia, where colder-than-expected gas prices” this year.
weather, supply outages and transport bottle- Nonetheless, shipments to Europe are grad-
necks caused a price spike and a scramble to ually rebounding, and PGNiG will likely not be
procure cargoes. This is a contrast to the previ- the only European company expecting to receive
ous winter, when mild weather depressed Asian more LNG during the course of this year. ™

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