Something interesting is happening in the LNG market

European countries have been racing to fill up their natural gas storage sites before the cold hits. Europe uses these gas storages to help during energy shocks, but they also supply about 25–30% of the fuel Europe uses in winter. The EU had set a goal to fill up 80% of their natural gas tank storages by 1 November. Now, the good news is that Europe hit that goal two months ahead of schedule. At the moment, gas storages are at almost 82%. So the new objective is to reach 95% by 1 November. But of course, with flows now stopped from Nord Stream 1, the big concern is not only how Europe will achieve this but also how they can replace natural gas coming from Russia. Europe has been trying to replace Russian energy with other energy sources such as renewable energy, nuclear energy, and increasing liquid natural gas (LNG) imports. Now the EU is building several LNG import facilities…which isn’t great news for Russia. But of course, all this takes time. According to research from Bloomberg, the EU needs around 118 million tonnes of LNG to replace Russian gas. But their current LNG infrastructure can only take in about half of that. Not only that, but Europe also faces competition from buyers in Asia. In fact, China has been a big buyer of Russian gas, with their Russian LNG imports rising close to 30% just this year. And then, of course, there’s the question of where all that LNG being imported is truly coming from… Here is OilPrice: ‘China has been quietly reselling Russian LNG to the one place that desperately needs it more than anything. Europe… and of course, it is charging a kidney’s worth of markups in the process. ‘As the FT reported recently, “Europe’s fears of gas shortages heading into winter may have been circumvented, thanks to an unexpected white knight: China.” The Nikkei-owned publication further notes that “the world’s largest buyer of liquefied natural gas is reselling some of its surplus LNG cargoes due to weak energy demand at home. This has provided the spot market with an ample supply that Europe has tapped, despite the higher prices.” ‘What the FT ignores, is that it’s not “surplus” — after all, if it was Chinese imports of Russian LNG would collapse. No — the correct word to describe the LNG that China sells to Europe is Russian.’ Not to mention, LNG still makes Europe dependent on gas imports that have to cross long distances. The best solution is ramping up renewable energy. But there’s lots more we could do. https://www.moneymorning.com.au/20220907/energy-wars-could-boost-this-boring-sector.html

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Something interesting is happening in the LNG market

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