Europe’s increasing reliance on liquefied natural gas has been driven by a pragmatic approach on the need to diversify sources of supply and strengthen energy security, according to the head of consultancy LNG Worldwide.

Speaking on Wednesday at the opening of the 22nd World LNG Summit & Awards event in Athens, Greece, LNG Worldwide managing director Pat Roberts said global trading patterns in LNG endured a “tumultuous” shift in a matter of months.

“The Ukraine invasion was no black swan, but rather a flock of black swans arriving [and disrupting energy markets],” she said.

With Russian pipeline gas flows to Europe disrupted heavily in the aftermath of the invasion, the LNG market reacted by redirecting cargos to Europe that were originally bound for Asia, plugging part of the supply gap.

“It was pragmatism in Europe that drove [the expansion of LNG demand],” said Roberts. “Suddenly, Europe was a premium LNG market, beating Asia on cargos.

“Most of the world LNG was called upon to replace Russian [gas].”

By the end of this year, Europe is expected to have imported some 120 million tonnes of LNG, compared with just over 80 million tonnes in 2021.

And demand is going to be “probably higher in 2023”, added Roberts, who set up LNG Worldwide in 2005 after two decades at Shell.

Lower demand in Asia, especially in China — where ongoing Covid-19 related restrictions affected local industrial output and, consequently, energy usage — freed up volumes that could be redirected to Europe.

As a result, some 14 million tonnes less were shipped to China this year.

Other Asian countries that did not receive LNG replaced it with higher coal usage. In the context of the LNG market, “higher coal usage is either delaying or destroying LNG demand”. according to Roberts.

Global LNG output in 2022 is expected to total around 395 million tonnes, LNG Worldwide estimated, with some 60% of output originating from the three main producers, Qatar, the US and Australia.

Long-term business model

Roberts stressed the industry’s attitude has veered towards long-term partnerships in supplying Europe and has to be seen beyond the short-term scenario of high prices and market volatility.

She cited the high-profile, large-scale deals announced in recent weeks as evidence of that.

QatarEnergy and ConocoPhillips signed a 15-year supply agreement for 2 million tonnes per annum of LNG into Germany.

The Qatari company also inked another supply agreement for 4 million tpa with China’s Sinopec for the duration of 27 years.

Commenting on these contracts, she said: “We’re not a short term business; we’re very long term,” adding that long-term contracts still make up the bulk of volumes traded globally.

Some 65% of global LNG output is covered by long-term agreements, with the remaining 35% of volumes transacted on the spot market currently, sources in Athens told Upstream.

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