Target to reduce dependence on Russian gas by more than 60 per cent; Liquefaction plants running at full steam; Brimming NW EU Terminals; Gazprom loses ground in EU; Asian buyers will not stake a claim before the new gas year; Hectic week for traders; EU's multi-faceted problem; EU energy system - lack of foresight to be fed with LNG only
According to the EU-US announcement, EU commission aims to increase annual demand for American LNG by 50BCM by the end of 2030 and procure 15BCM more in 2022, not to mention the EU’s REPowerEU' s target to reduce dependence on Russian gas by more than 60 per cent within this year. Whereas the LNG's significance remained largely undervalued at COP26 along with the EU Environmental goals for methane emissions, that was all outpaced by the current energy conundrum where LNG influx appears to be a silver lining, though not the sole solution, but rather more as a complementary one.
EU IMPORT TERMINALS AT FULL STEAM
As we know, utilization rates of regasification terminals can exceed the standard nameplate capacity during periods of peak use. This is exactly what happened to the Import Terminals which have been running close to their nameplate capacity for the last two months, with definitely the heaviest burden for NW LNG entry points, where the nameplate capacity for some regasification facilities were reaching an all-time peak utilization of 115% in April 2022, notably the Europe’s largest LNG terminal in Kent, UK, cracked their own record.
One fact worthy our attention is that the aggregated Gazprom supply is almost in parity with the overall EU LNG Import; in other words, Gazprom sales could be deemed the same degree of success achieved by EU to secure its LNG shipments. Gazprom's overall natural gas exports to countries outside CIS for the first 4 months of 2022 equals to 50 BCM, whereas over the same period the total LNG imported at the European regas terminals are above 46BCM (average regas - 15bcf/day).
US EXPORT - WINDY AT THE TOP
The United States took the key role as a swing supplier on global gas markets for Q1/Q2 with liquefaction plants running way above their nameplate capacity, exposing them to accidents and failures in equipment and lengthy maintenance outages. In the Freeport instance, utilization exceeded 96% of peak capacity for the last two months, compared to 87% on YOY basis.(EIA estimation)
Freeport's proportion of the Total LNG exported is 20%, whereas the downtime of Freeport will cost almost 40 cargoes or roughly 4.5BCM of natural gas with the terminal not to return to full service until late 2022.
Thinking logically, Freeport outage could not shake up the front position of US in LNG exporting, on the occasion of the proposed LNG Projects, actually this will consolidate more its position as a top producer, by adding "new build LNG liquefaction capacity of 220.3 mtpa (million tonnes per annum) by 2026, while expansion projects account for the rest with 30.3 mtpa." according to GlobalData’s latest report. Interestingly, 160MTPA of the aforementioned 220MTPA are assigned with permits.
ASIA'S STAKE IN THE LNG 'FIGHT-OVER-CRUMBS'
It is very clear that Asian buyers will not stake a claim before the new gas year, mainly due to the absence of well-developed storage infrastructure, unlike Europe. However, the heavily loaded regas plants were and will be the driving force behind any diversion decision for LNG relocation to Asia, despite the price differential in favour of TTF. As the Import terminals capacity is approaching to be fully utilized, the price differential(TTF-JKM) will move towards convergence. Soaring global gas prices have sent a signal that more supply is needed. However, over the last month we have actually seen cargos diverting towards Asia pacific because of regasification constraints in Europe.
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