EU reliance on costly spot LNG to continue – expert


(Montel) Europe is set to continue depending on pricy and volatile spot LNG imports for the foreseeable future as it scrambles to secure gas supplies in the wake of Russian curtailments, an expert said on Tuesday.

Imports of the chilled fuel to the region were “likely to continue being spot based”, Andy Flower, an independent LNG consultant and former BP executive, told Montel on the sidelines of the World LNG Summit in Athens.

“It’s got no choice if it wants gas,” he said, with few long-term deals having been announced by Europe.

Two-thirds of the region’s LNG imports were spot based, with the share in northwest Europe as high as 95%, with most indexed to benchmark prices on the Dutch TTF hub, added Flower.

Seesawing prices
These prices have seesawed in a wide EUR 70-350/MWh range, indicating a highly volatile market amid the fallout from the war in Ukraine.

The TTF front-month contract was last seen trading around EUR 123/MWh.

“Prices are likely to remain high as Asian and European buyers continue to compete for available supply,” said Flower, adding the extreme volatility seen this year was likely to continue until 2027, when market tightness would ease amid more global supply.

As such, European prices were also set to be driven by Asian LNG spot demand, which accounted for about 30% of the total.

Long-term alternatives?

However, Rystad Energy said in its latest note on the gas market that “Europe is beginning to tire of Russia’s intermittent supply and is increasingly seeking long-term alternatives”.

It cited the fact that today Germany signed two agreements to import 2.6bcm/year of LNG from Qatar’s North Field for at least 15 years from 2026.

Rystad also said the market was “already pricing in the risk of a further decline [in] volume[s] from Russia or even [a] drop to zero”.