Upheaval on the LNG market – Europe buys the gas away from emerging countries

LONDON/SINGAPORE, September 27 – The sudden global boom in liquefied natural gas (LNG) to replace Russian pipeline gas is having a huge impact on the industry and emerging markets: Rising LNG cargo prices have displaced dozens of smaller traders, and that the business was concentrated in the hands of a handful of international energy companies and global trading houses. Countries like Pakistan or Bangladesh also get less LNG because rich Europeans buy the available shiploads at higher prices.

According to experts, that will not change until 2026. Only then will more LNG gas be available and prices should fall. And only then should security of supply be increased again for poorer countries that depend on this gas for energy production.


The global LNG market has more than doubled in size since 2011, with dozens of new players and smaller players expanding in Asia. In recent years, smaller traders have accounted for 20 percent of LNG imports in China alone. However, the sharp increase in the price of an LNG shipload from $15 to $20 million two years ago to $175 to $200 million most recently has had a dramatic impact on many smaller market participants.

“The biggest challenge facing any market participant right now is creditworthiness,” said Ben Sutton, CEO of Six One Commodities, a US-based LNG trader that had to scale back operations following the price hike in the third quarter of 2021. Additionally the risk is increased for traders as price action is driven more by geopolitical factors than fundamentals.

The drastically increased costs of an LNG cargo and the high volatility would have put the smaller players under a lot of pressure, says Tamir Druz, CEO of Capra Energy, an LNG consultancy. In Shanghai, this has led some of these smaller players to “sit” their offices in Singapore’s commercial hub, while second-tier Chinese traders and some Korean firms have scaled back activity as financing has become more difficult. “LNG has become a commodity for the rich again,” Pablo Galante Escobar, global head of LNG at energy trader Vitol, said at the international Gastech conference in Milan this month.


Players with large, diversified portfolios and strong balance sheets such as the oil majors Shell, BP and TotalEnergies, as well as large trading houses such as Vitol, Trafigura, Gunvor and Glencore are now benefiting. Shell and TotalEnergies are estimated to have a combined portfolio of 110 million tonnes of today’s 400 million tonnes LNG market, says Jason Feer, global head of business intelligence at energy and marine consultancy Poten & Partners. Both have built up portfolios, with Shell BG and TotalEnergies taking over Engie’s LNG division. Both are also partners in Qatar’s North Field, one of the largest LNG projects – from which Germany would also like to buy LNG gas in the future.

Adding Qatar Energy’s 70 million tonne portfolio and BP’s estimated 30 million tonne portfolio, four players make up more than half of the market. And the big players have capital: Shell and TotalEnergies reported record profits, while Vitol posted record profits for the first half of 2022, beating 2021 full-year results. Shell and TotalEnergies make a lot of money by buying LNG cheaply in Egypt and the USA and selling it expensively to the Europeans.


The high prices for LNG cargoes are also shifting the customer structure. Because some loads originally intended for poorer countries are now diverted to European customers. “Pakistan and Bangladesh are the big losers,” said Felix Booth, head of LNG at data analytics firm Vortexa. Because both countries supplied themselves on the spot market, they are affected by price fluctuations. In July, for example, Pakistan LNG Limited (PLL) did not receive a single bid in a tender to import ten LNG shipments – because others bought at higher prices.

“Until we build more infrastructure and launch more ships, it will be difficult to compete with established markets,” said Charlie Riedl, CEO of trade group Center for Liquefied Natural Gas (CLNG). “It could get worse if China returns to the market in a big way.” China has not been in the market this year due to lower demand due to its corona lockdowns and slower economic growth, says Poten & Partners’ Feer. “This allowed volume to flow to Europe.”

Upheaval on the LNG market – Europe buys the gas away from emerging countries

Source: Reuters

Cover photo: Symbolic photo

Here you can find the current live stream on the topic Web3 NFT Metaverse Talk

Leave a Comment