US LNG will not drive Russian gas out of Europe or seriously harm Russia’s share of the market as long as Russia continues to be a reliable supplier, said Robin Mills, founder and CEO of Dubai-based consulting firm Qamar Energy.
Mills told Anadolu Agency that US LNG is a challenge to Russian gas in that it caps the prices Russia can demand and also diversifies European supplies.
“It also prevents Russia from cutting off supplies, now that Europe is increasingly interconnected and has surplus LNG import capacity, and has new terminals such as Krk in Croatia, Swinoujscie in Poland and Klaipeda in Lithuania, that serve previously isolated areas," Mills said.
Nonetheless, despite its challenge to Russia, he said US LNG would not drive Russian gas out of Europe or seriously harm Russia’s market share, as long as Russia continues to be a “reasonably reliable supplier.”
"Russian gas can always undercut US LNG on price, and Europe will demand more imports, at least in the medium term, as its own production declines," Mills noted.
Russian exports to Europe are already growing steadily, according to official figures.
In the first quarter of 2021, deliveries to Germany were up 33.3% on the same period in 2020, and, on the same basis, deliveries to Poland were up 18.5%, to Serbia by 71.3%, to Finland by 67.3%, to Romania by 90.4%, to Bulgaria by 52.4%, and to Greece by 23.4%.
But the biggest increase was to Turkey, with deliveries up by no less than 106.6%.
- LNG still popular, gas demand will increase
The demand for LNG has grown by about 2% in 2020 compared to 2019 despite the negative impacts of COVID-19 on overall energy sector.
Global natural gas demand is forecast to increase by 2.8% this year after experiencing its largest drop on record by 2.5% in 2020 due to milder winter and COVID-19 lockdowns, according to a new report by the International Energy Agency (IEA).
The world's natural gas demand fell by 100 billion cubic meters (bcm) in 2020 down to 3,910 bcm.
This was triggered by exceptionally mild weather in the early months and the onslaught of the COVID-19 pandemic, according to the IEA's Gas Market Report, Quarter 1 2021.
The global natural gas market continued to gain in depth and liquidity in 2020 despite shrinking demand.
The US continued to be the largest source of flexible LNG with a 20% share of spot and short-term volumes, while China and India remained the world's largest buyers of short-term and spot LNG with 20% and 11% market shares respectively.
In Europe, Turkey increased purchases of short-term and spot LNG by more than 50%, largely at the expense of piped imports from Iran and Russia, especially during the first-half of 2020, the IEA found.
The expected gas demand recovery of 2.8%, or around a 110 bcm increase this year, is a far cry from the 7.5% year-over-year post-2009 financial crisis rebound in 2010.
With this increase, total global gas demand is forecast to reach 4,021 bcm this year with emerging markets being the main drivers of the demand growth.
Fast growing markets in Africa, Asia, Central and South America and the Middle East are projected to account for about 70% of global demand growth in 2021.
According to the IEA's forecast, mature markets are likely to see a more gradual recovery though some may remain below their 2019 demand levels.
By Murat Temizer