Europe is the largest customer in the global liquefied natural gas market by 2022, with the region importing higher volumes than rival buyers as it seeks to replace dwindling Russian pipeline gas supplies.
In previous years, the EU lagged behind Japan and China in terms of LNG imports, but Russia’s energy arsenal since attacking Ukraine has forced the bloc to seek alternative fuel supplies.
With Europe needing to import larger volumes to fill storage facilities by 2023, the global LNG market will remain tight, likely increasing prices for gas users around the world.
“When prices rise in Europe, Asia should [increase the amount it pays] to be able to compete to attract LNG cargo,” said Olumide Ajayi, senior LNG analyst at Refinitiv. “Europe has become a premium market.”
EU countries will import 101 million tons of LNG in 2022, 58 percent more than the previous year, data from Refinitiv shows. The bloc accounted for 24 percent of global LNG imports during the period.
European businesses are being helped by reduced demand in China, said Namit Sharma, global head of oil and gas at consultancy McKinsey. Beijing’s strict zero-Covid policy has caused the economy to shrink and reduce energy demand in 2022. “If China buys more LNG, it will be difficult for Europe to find sources of this gas,” Sharma said.
China’s LNG imports in 2022 total 64.5 million tons; in 2021 it is the largest importer in the world with 79 million tons. The country also re-exported some excess LNG to Europe this year, helping to boost the bloc’s gas reserves.
EU LNG imports last year equaled 137bn cubic meters of natural gas, close to the 140bn cm of pipeline gas received from Russia in 2021. But analysts warn that Europe should import more LNG in 2023, as that is the year of the general void of pipeline gas Russian, as Moscow moved to stop supplies.
Meanwhile, China is also easing its zero-Covid rules, which analysts expect will lead to a revival in LNG demand – although not the same as in 2021, as Beijing has deployed large amounts of renewable energy and increased domestic gas supplies. .
LNG now makes up about 35 percent of Europe’s gas supply, up from 20 percent last year, according to data from think-tank Bruegel.
The International Energy Agency warned in December that the EU could face a potential gas supply-demand gap of 27bn cm in 2023 in a scenario where Russian pipeline gas deliveries drop to zero and Chinese LNG imports rebound to 2021 levels.
Improvements in energy efficiency and faster development of renewable energy will help fill the gap, the IEA said. These changes will be necessary “to meet the condition of recharging the gas storage level to 95 percent and maintain the security of gas supply until the spring of 2024 without great pressure on the European market and consumers”.