Spot LNG procurement in Asia falls as bulk supplies make way to Europe: Report

Spot procurement of liquified natural gas (LNG) by Asian countries have declined with the bulk of supplies being diverted to Europe amid the Russia-Ukraine conflict and the consequent volatility in the global energy market, said a report by S&P Global Commodity Insights.

Demand for LNG in Europe has risen with the European Union shunning Russian energy supplies or placing restrictions in retaliation to Moscow’s invasion of Ukraine.

“Asia’s spot LNG procurement has nosedived since the Russian invasion of Ukraine, with the bulk of spot volumes diverted to Europe in the first half of 2022. India and China accounted for most of the decline in spot procurement, and price-sensitive importers like Bangladesh, Pakistan and Thailand are expected to be impacted by rising spot LNG prices this winter,” the report said.

As per S&P’s LNG outlook for 2023, regional gas inventories after the winter and the impact of sanctions and price caps on Russian LNG supply to Asia will be things to watch out for in the near term.

It noted that in 2023 the true scale of the impact of high LNG prices on the natural gas sector will become clearer – in the form of decision making around Asia’s LNG supply and regasification projects, fuel switching, gas market reforms and liberalization, and long-term contracts.

Market participants expect stalled upstream investments by national oil companies in India, China and Southeast Asia, including Petronas, PTTEP and Pertamina, in gas projects to move ahead.

“Meanwhile, demand-side investments in regasification will grapple with long-term gas supply issues, such as countries planning to become new LNG importers — Philippines, Vietnam and Sri Lanka — or those expanding current capacity like India and China,” it said.

India’s LNG imports are expected to decline slightly in 2023 from 2022 due to reduced term deliveries under a contract impacted by Russian sanctions, but the share of spot LNG is expected to increase if spot prices average $23/MMBtu in summer 2023, said Ayush Agarwal, LNG analyst at S&P Global.
Source: Livemint