Gas gap in Europe drives U.S. LNG exports to record high

Sky-high European demand drove U.S. LNG exports to a record in December, Refinitiv data showed, with winter supply worries set to sustain orders for the fuel. 

About half of the record U.S. LNG volumes shipped last month went to Europe, up from 37% earlier in 2021, data from Refinitiv and the U.S. Energy Information Administration showed. 

The gains reflected soaring demand for the home heating and industrial fuel that pushed prices in Europe and Asia to record highs. The U.s. has ample and cheap supplies as its shale oil and gas boom in the last two decades led to domestic production that has exceeded U.S. demand by about 10%.

Vessel tracking data showed about 7.15 MM tons of LNG were shipped last month on 106 vessels, up 16% compared to 6.14 MM tons on 89 vessels the same month a year ago. That topped the previous record of 6.51 MM tons set in May. 

Dutch gas prices, the European benchmark, have cooled since late December removing their premium to Asia. On Wednesday, the Japan Korea Marker (JKM) price for Asia spot gas was $34.19 per MM British thermal units, a premium of about $4 to Europe. 

Two LNG cargoes originally destined for Europe have been re-routed this month, people familiar with the matter said, with one heading to Asia. That is a reversal to late last year when at least 10 cargoes heading for Asia were re-routed to Europe attracted by the price differential. 

"LNG diversions from Asia are a useful stop-gap measure but are not a sustainable substitute for stable pipeline supplies," Wei Xiong, senior analyst at consultancy Rystad Energy, said. 

LNG demand in Asia may jump in January, halting further diversions to Europe, she added. 

"Prices are volatile right now," said Reid I'Anson, senior commodity analyst at data provider Kpler. 

While LNG prices being higher in Asia than in Europe lowers the likelihood of a new record for U.S. exports to Europe, flows could shift again if temperatures tumble there, I'Anson said.

Ports in Britain, the Netherlands and Belgium have around 30 LNG tankers scheduled for delivery this month, with at least 13 arriving from the U.S.

Chilling 

While the United States has plentiful natural gas, its processing and chilling capacity is limited. Gas flowing to U.S. LNG export plants in December hit a record 12.2 Bft³d, about the maximum processing capacity. 

There were no LNG processing plants approved in the U.S. last year, while nearly a dozen plants proposed in past years are still awaiting financial commitments. 

Spending on new LNG projects fell in recent years as trade tensions between the U.S. and China rose and more recently as gas prices fell during the COVID-19 pandemic. 

• Most Read
• Most Commented