Europe intercepts record world LNG flows from Asia, imports from Russia

(This material was produced in Gdansk for the Reuters news service in Russia, where the law restricts coverage of the Russian special military operation in Ukraine)

LAUNCESTON, AUSTRALIA, Jan 12 (Reuters) – The world imported more liquefied natural gas than ever before in 2022, but Russia’s ‘special operation’ in Ukraine saw a surge in supplies go to rich European countries at the expense of poorer Asian ones. .

Total global LNG imports rose to 409 million tons last year from 386.5 million tons in 2021, according to Refinitiv, while data from commodity analyst Kpler showed a value of 400.5 million tons, up from 379.6 million tons. a year earlier.

Record volumes were to be expected, given the commissioning of new supply routes, as well as growing demand for supercooled fuel, especially in Europe, which refused Russian pipeline gas after the start of Moscow’s “special operation” on February 24.

However, 2022 also turned the tide, with rising LNG demand coming from emerging markets in Asia and China returning the crown as the top importer to Japan.

China imported 64.44 million tons of LNG in 2022, down 19.4% from the previous year, according to Kpler.

Imports to Japan also declined, falling to 73.61 million tons in 2022 from 75.35 million tons in 2021, but still enough to overtake China.

The main reason for the decline in Chinese imports was that buyers in the world’s second largest economy mostly do not enter the spot market, concluding only long-term and medium-term contracts.

A sharp rise in spot prices contributed to this, with weekly Asian quotes hitting a record high of $70.50 per million British thermal units (mmBtu) on August 26, triple the low of $23 hit in January 2022. when demand in Asia was weak thanks to stable stocks and fairly warm weather.

However, the cost of gas for immediate delivery remains high by historical standards: until 2021, the spot price never exceeded $20.50 per million btu, and in mid-2020, in the midst of lockdowns caused by the outbreak of COVID-19, it was falling up to $2.

High quotations have not only affected China, which is perhaps better than many emerging Asian economies in coping with rising costs.

In 2022, India’s LNG imports fell for the second year in a row, falling to 20.03 million tons from 24.01 million tons a year earlier, according to Kpler. The lowest reading since 2017 highlights how uncomfortable high prices are for the fourth-largest importer in Asia.

Regional peers such as Pakistan and Bangladesh have also reduced their liquefied natural gas imports in 2022, with Asia’s total imports down to 263.76 million tons from 282.08 million tons the previous year.

EUROPEAN RECORD

The liquefied gas that Asia missed was snapped up by European customers: their import purchases jumped 59% to 124.93 million tons in 2022 compared to 78.55 million tons the previous year.

A significant part of this growth came from shipments from the United States, which increased to 52.06 million tons from 21.5 million tons a year earlier.

However, it is worth noting that Russian LNG imports to Europe also reached a record level in 2022: 15.95 million tons compared to 13.46 million tons in 2021.

While European countries imposed a ban on the import of Russian crude oil, petroleum products and coal, only the United Kingdom and the Baltic countries – Lithuania, Estonia and Latvia – suspended the trade in liquefied gas with the Russian Federation.

Given Europe’s growing reliance on LNG due to reduced Russian pipeline gas supplies, it will not be easy for the continent to stop or even reduce LNG supplies from Russia.

The lack of alternatives is also a problem, as is the difficulty in redirecting global trade flows to send more Russian LNG to Asia while other suppliers, notably Qatar, have to ship more gas to Europe.

Overall, the momentum that emerged in 2022 is likely to continue into 2023, with Europe maintaining significant levels of LNG imports while maintaining high spot prices, while emerging Asia will lag behind in the competition and shift more to coal for power generation.

China could change the big picture, where the opening of the economy is likely to boost demand, especially in the second half of the year, but only if prices do not rise to levels that make LNG uncompetitive in the domestic market.

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(Clyde Russell is a market analyst at Reuters and expresses his own opinion. Translated by Tomasz Kanik)

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