Liquefied natural gas (LNG) imports to Europe are easing the effects of the energy crunch by offering an alternative to piped natural gas amid low stocks.
Natural gas prices in Europe increased by over 900% since January, reaching €187 per megawatt-hour at the Dutch TTF hub on Dec. 21.
To take advantage of higher prices, many LNG vessels en route to Asia changed course for Europe last month, as the continent struggled to prevent any further market volatility and major price increases.
Recent VesselsValue data compiled by Montel, an information provider for the European energy markets, showed a surge in LNG cargoes last week following the recent spike in prices.
According to Montel, the data service tallied at least 53 LNG cargoes heading to European destinations last week, up from 30 the previous week.
The vessels are anticipated to bring 5.2 billion cubic meters (bcm) of natural gas to Europe, up 77% week on week, Montel said, adding that more vessel diversions to Europe are expected.
The continent's LNG imports also soared to 7 million tons in December last year, according to Energy Intelligence.
These imports are the highest since March and up by about 0.8 million tons month on month, according to analytics firm Kpler data compiled by Energy Intelligence.
'Additional LNG can help reduce the current deficit, but few volumes of LNG will not reduce the price significantly,' Irina Kustova, a research fellow at the Centre for European Policy Studies (CEPS) in Brussels, told Anadolu Agency in an interview.
The market’s 'fixation' on supplies from Russian gas giant Gazprom remains a very important component of hub pricing dynamics, she explained.
Kustova stressed the importance of having sufficient LNG or piped gas inflow in Europe to stimulate gas price decreases in general but warned that if this does not happen, prices would remain high, with consumers preferring to wait than to buy gas on the expensive spot market.
- 'Current high gas prices could attract more LNG supplies'
Kustova expects that the current high gas price could attract more LNG supplies through new long-term contracts as can be seen recently in Italy and Poland, both of which have taken steps in this direction.
According to Kustova, increased usage of LNG will much depend on the EU regulation on the maritime sector which is part of the Commission's 'Fit for 55' proposal that could class LNG as a transition fuel in the maritime sector as part of the EU’s Green Deal.
The Fit for 55 package, which the EU revealed last July within the scope of the Green Deal, pledges to reduce emissions by at least 55% by 2030 compared to 1990.
'The proposal declares that LNG is a transition fuel in the maritime sector and if the proposal is adopted by member states, it can also positively influence LNG imports. Yet, it remains difficult to assess if and when it is adopted and how much the final document will impact the LNG imports overall,' she explained.
Kustova stressed that as a rule of thumb, the import share of LNG out of the total EU gas imports is unlikely to reach more than 35% in the near future, even under a very positive scenario.
By Ebru Sengul Cevrioglu
Anadolu Agency
energy@aa.com.tr