Getting Asia to burn more coal could free up 50 Bcm of LNG

Thursday, 07 April 2022
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Persuading Asia to use more coal could free up around 50 Bcm of LNG for Europe’s tight gas markets, analysts reckon. This would help Europe get a step closer to meeting the Commission’s plan of reducing Russian gas supplies by 102 bcm before year-end, though it would be cheaper if EU power generators switched from gas to coal and nuclear instead.

The International Group of Liquefied Natural Gas Importers (GIIGNL) suggests it seems “challenging” to source enough additional LNG to meet the Commission’s RePowerEU targets If European buyers could snatch up all the new LNG volumes coming onstream in 2022 in the Atlantic basin, and attract additional cargoes previously routed to Asia, an increase of 32-45.5 bcm “can really happen”, said Sindre Knutson, vice president of gas and LNG markets at Rystad Energy.

Global gas liquefaction and export capacity could rise by 22.6 million tons this year, according to GIIGNL estimates, most of which supplied by the United States. At best, Europe could secure around 12 mt of that, as most volumes are already locked into long-term supply deals to Asia.

“Persuading Asian buyers to use coal and free up LNG,” could help, Wood Mackenzie advises, as would maximising Europe’s indigenous gas production and pipeline imports. “But this would only be a temporary solution to get through the summer and would leave Europe with perilously low storage volumes going into winter 2022/23 and risks demand disruptions.

Winter prices next year could be higher than 2021/22,” principal gas and LNG analysts Kateryna Filippenko warned.

Diverting LNG cargoes, initially destined for Asian markets, could give hard-pressed European buyers access to about 15 bcm of extra LNG from April through October – provided enough import capacity is kept available. But how much gets diverted will hinge on Europe’s willingness to play higher prices than China and the rest of Asia. Benchmark Dutch TTF gas prices have traded at a premium to their rival Asian hub, the JKM, at most days of the year. 

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