Brazil’s record LNG imports impact on Europe

Thursday, 30 September 2021
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Brazil’s LNG imports are set to hit a record this month, data from Refinitiv and consultancy Kpler showed.

US cargoes normally destined for Europe are being diverted to Brazil to address a power shortage.

The worst drought in almost a century has starved the hydropower plants that normally supply nearly two-thirds of Brazil’s electricity. As a result, the country has turned to US gas with its LNG purchases helping to drive global gas prices to record levels.

“The strong demand from Brazil means there is less LNG supply being directed to European terminals,” said Laura Page, Kpler’s senior LNG analyst talking with Reuters.

European gas storage has fallen to its lowest level in at least 10 years, making traders fiercely compete for LNG ahead of the winter heating season in the Northern hemisphere. Prices in Europe and Asia are at record seasonal levels.

More than 80% of Brazil’s LNG deliveries this month will come from US Gulf export terminals, Refinitiv data showed.

Overall gas imports are set to hit 1 mill tonnes by the month’s end, up nearly 20% over July’s record, Kpler estimated.

“The worst month (for demand) will be October,” said Rivaldo Moreira Neto, head of Brazilian consulting firm, Gas Energy. “I don’t expect any improvement in the next three to six months.”

China surpassed

In July, US LNG purchases by Brazil and Argentina combined surpassed China’s, taking 62.4 bill cu ft of gas, compared to China’s 42.2 bill cu ft, according to the US Department of Energy (DOE).

A record 142 LNGCs arrived in Brazil from the US in the six months to the end of July, the DOE said. Some of the vessels partially discharged in Brazil and then unloaded the remaining cargo in Argentina.

Another 17 cargoes are believed to be heading for the region as of last week.

New LNG terminals that will increase import capacity are opening, as state-controlled Petroleo Brasileiro (Petrobras) relinquishes what was a near-monopoly in natural gas.

A couple of weeks ago, a power plant backed by bp and gas connected to one of the first privately owned LNG import terminals was turned on months ahead of schedule to avoid blackouts.

“Until it rains, and we don’t know when it is going to happen, price levels will cause despair,” said a trader who buys cargoes for Brazil, Reuters reported. 

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