Asia prices of liquefied natural gas could jump to above $20 per million British thermal units (mmBtu) if European gas supply tightens this winter, an analyst at Goldman Sachs told reporters on Wednesday.
“That’s the near-term dynamic, given this vulnerability of Europe, the lack of spare capacity, the loss of the residual Russian volumes currently going through Ukraine, and I should say, a colder than average start of the winter,” said Samantha Dart, co-head of global commodities research at Goldman Sachs.
There will also be delays in the upcoming LNG supply projects across the Americas, so Europe and Asia will have access to less LNG next year than originally expected, added Dart.
Residual Russian gas flows going through Ukraine are also scheduled to stop after the current transit deal expires at year-end.
“Europe is going to start next summer a lot tighter than this past summer.”
This matters to Asian LNG markets, as Asia consumes more than 60% of global LNG while only producing over 30%, she said.
“All the LNG that Asia needs to buy to fill this deficit comes from the Atlantic basin, so Asia prices have to compete with European natural gas prices…if Europe is tight, then Asia LNG prices will be elevated as well.”
CHINA HIGH
In China, the world’s largest LNG importer, shipments of the chilled fuel are set to hit a record high of more than 80 million metric tons this year, although year-on-year growth for 2025 will not be as strong as this year, Goldman Sachs forecast.
This is due to more normalized economic growth going forward and as the base consumption of gas is larger, said Dart.
China imported 63.5 million tons of LNG in the first ten months of this year, customs data showed, versus a record 78.89 million tons in 2021.
Increasing utilisation means the Power of Siberia gas pipeline will soon reach capacity, leading to slower growth in Russian piped gas exports to China, she said.
“As China’s gas consumption continues to grow, this is going to have to be met by higher LNG imports at the margins,” she said.
China’s power sector will be the main long-term driver of LNG consumption, she said.
“The consumption of power will grow so much that China will need everything. It will need renewables. It will need coal, it will need natural gas. So even if you keep gas’ share of total generation largely unchanged, because the size of the pie is bigger, the slice is bigger as well.”
(Reporting by Florence Tan; Writing by Emily Chow; Editing by Tom Hogue and Janane Venkatraman)