Page 18 - RusRPTDec22

2.6 Europe rushes to sign long-term LNG contracts with US
Global gas and LNG markets have experienced a seismic shift as a result of Russia’s invasion of Ukraine. Spot prices are rising to record levels in both Asia and Europe and as gas buyers – especially in Europe – search for viable alternatives to Russian gas, LNG contracting activity has accelerated, reports Wood McKinsey.
In reaction to record LNG prices, buyers have started signing up for long term deals. Annual volume signed under new long-term contracts in 2022, is already at its highest since 2018, with more than 60 mmtpa (million metric tonnes per annum) of LNG contracts signed – with the majority to be supplied from US LNG projects.
Despite the desire of European buyers to purchase additional LNG, the majority of contracting since the invasion of Ukraine has been by portfolio players and trading houses, signing up to buy more than 30 mmtpa of LNG under new Sales and Purchase Agreements (SPAs) and Heads of Agreements (HOAs) in 2022.
Portfolio players and traders are setting themselves up to supply LNG to Europe in the medium term and Asia in the longer term (when European demand is expected to begin to fall) – by taking large volumes of US LNG.
With the shift in trade patterns, LNG suppliers traditionally focused on supplying the Pacific Basin have now moved to secure supply in the Atlantic.
18 RUSSIA Country Report December 2022 www.intellinews.com