For the third month in a row, Europe has emerged as the number one importer of Liquefied Natural Gas from the US. Taking nearly 75% of exports from the US, Europe has retained the spot of the number one importer of LNG from the US since December last year.
Limited pipeline capacity and soaring demand for fuel are just two of the reasons that Europe has had to step up its imports of liquefied natural gas from the US. Europe has long been an importer of LNG from Russia, but amid fears of more sanctions against Russia, Europe has been forced to find alternative supplies of liquefied natural gas. After the Russian invasion of Ukraine, Europe’s imports from the US will likely see a substantial increase.
The Chief Energy Officer at the University of Houston, Ramanan Krishnamoorti, was quoted as saying that there will be expanded diversion of exports to Europe from the US, after the UK and Canada closed ports to Russian shipping vessels earlier this week.
New shipping constraints are likely to boost the prices of liquefied natural gas, while also ensuring that demand for the same remains high. According to Refinitiv, an economic analytics company, the European LNG benchmark traded at USD 37.36 in February, compared to USD 27.59 for the corresponding period in January this year.
Kaushal Ramesh, analyst at Norway’s research firm Rystad Energy, was quoted as saying that there would be a further upswing in demand for LNG imports from the US if other European nations close their ports to supply ships from Russia.
Earlier this week, Germany had announced that it would build two more LNG receiving terminals and increase natural gas reserves to reduce dependency on Russian supplies of liquefied natural gas.
Meanwhile, the US nearly reached full export capacity, with supplies in March expected to reach 5.2 mtpa, according to analysts at Kpler, a data provider.
Augmenting existing US supplies, the first cargo of liquefied natural gas produced at VentureGlobal’s export facility departed for Europe earlier this week. The cargo was loaded onto a Greek tanker.
EU looks to reduce dependency on Russian LNG supplies
In an effort to reduce dependency on Russia amid the escalating Ukraine crisis, EU leaders are looking at alternate sources for supply of LNG fuel.
Rising to above 138 Euro per megawatt-hour, natural gas prices in the EU rose by over 50%, according to data provided by Trading Economics, an economic and financial data platform.
Harsher sanctions imposed on Russia by members of the EU and other significant Western nations could force Russian energy exports, including natural gas, out of the global market.
The suspension of approval of the Nord Stream 2 pipeline by German Chancellor Olaf Scholz has raised concerns about a sharp supply disruption of natural gas to the EU.
President of the European Commission, Ursula von der Leyen had expressed confidence that even in the event of a full disruption in supply from Russia, the EU would be safe for the winter. She also stated that Europe would be able to substitute LNG from Russia with supplies from allies the world over. Von der Leyen also expressed that the situation still showed Europe’s heavy dependency on Russian gas, while emphasizing the need to diversify suppliers of the same to the EU.
40% of natural gas imports to the EU come from Russia, while Germany accounts for 55% of its natural gas imports from Russia. Since it phased out nuclear power, and is also exiting coal-based energy, Germany remains highly dependent on natural gas in its effort to shift to renewable energy sources by the year 2045.