Page 6 - Euroil Week 05 2020

EurOil COMMENTARY EurOil
High hopes for Europe
The LNG industry is hopeful that Europe will be able to absorb more supply this year, as a global glut of the fuel continues to weigh on prices
EUROPE
WHAT:
There is some optimism that Europe has the capacity to absorb even more LNG supply.
WHY:
Various countries on the continent are building more LNG import infrastructure.
WHAT NEXT:
Some European countries will also seek to take advantage of new demand for LNG as a marine fuel.
PRODUCING and trading LNG looks like an increasingly less attractive proposition since last year, when a ood of new supply started to bring down prices for the super-chilled fuel. But demand is still there, and growing – albeit slower in some regions – and producers remain hopeful that this rising demand will need to be met.
Another notable trend from last year is the emergence of Europe as a growing importer of LNG. Now, early developments from the start of 2020 indicate that there is still room for Euro- pean imports to keep growing, and that the region can play a signi cant role in absorbing some of the global glut.
Record imports
Consultancy IHS Markit reported last week that one of the records broken within the LNG industry in 2019 was that for European imports. e consultancy noted that Europe set records for imports each month individually as well as for the year as a whole. e continent’s annual net imports totalled 87.2mn tonnes, surpass- ing the previous record of 65.5mn tonnes set in 2011, IHS Markit said. e consultancy expects new LNG supply that comes online in 2020 to outpace Asian demand growth, and as a result it anticipates that sales into Europe will need to be maintained.
A number of factors helped to spur Euro- pean imports, including lower prices leading to increased sales on the spot market. In addition, several European countries are in the process of phasing out coal, bolstering demand for alterna- tive fuels for power generation.
This is coupled with efforts to diversify sources of natural gas supply and reduce dependence on Russia among some European countries. However, European domestic gas production is falling, and this will be exacer- bated by the planned shut-down of the Gro- ningen eld in the Netherlands, which is the continent’s largest onshore gas eld, by 2022. e closure is now happening eight years ear- lier than previously planned, though the Neth- erlands’ government has said the eld may be kept operational until 2026 in order to meet high demand in winter.
Nonetheless, this combination of factors has encouraged European countries to turn increas- ingly to LNG to meet their gas needs. And Europe is increasingly more capable of absorbing LNG, as gas hubs on the continent become more
liquid, regulations evolve and new infrastructure is built. Indeed, Europe is still thought to have spare regasi cation capacity headed into 2020, despite swelling stockpiles in recent months. However, some countries will have to move fast in order to avoid future constraints. And indica- tions from recent weeks suggests that some are doing just that, with work to boost LNG import capacity underway.
Polish plans
Poland’s PGNiG, which has a near-monopoly on the country’s gas imports, said this week that the share of gas imports it received from Russia dropped to around 60% in 2019, from roughly 67% the previous year. Meanwhile, LNG’s share of total imports increased to around 23%, from 20% a year earlier.
Illustrating trends that are playing out across Europe, PGNiG said that it had received 31 LNG deliveries to Poland in 2019, compared with 23 a year earlier. e number of cargoes the Polish company purchased on the spot market expanded from 4 to 10 during that period. A long-term contract to receive LNG from the US’ Cheniere Energy also came into force last year.
It is worth noting that Poland obtained about 90% of its gas from Russia prior to the launch of an LNG import terminal at Swinou- jscie in 2016.
Poland has signi cantly cut its imports of Russian pipeline gas since the launch of an LNG import terminal at Swinoujscie in 2016.
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w w w . N E W S B A S E . c o m Week 05
06•February•2020