Related Articles
Forward article link
Share PDF with colleagues

Libya and Fukushima dent global gas glut

Political problems in Libya, and the Fukushima nuclear disaster in Japan have both put a dent in global gas supply

The European liquefied natural gas (LNG) demand picture is dependent on Libyan gas exports. Since the North African country descended into civil war in February, it remains in a political stalemate, with oil and gas exports shut in

The Greenstream pipeline from Libya to Italy supplied over 12% of Italian demand last year, while the country also exports small quantities of LNG to Spain; last year it shipped about 34 million cubic metres (cm). But since civil war halted gas exports, Europe has been forced to look to different sources to make up the shortfall.

 LIBYA GAS EXPORTS TO EUROPE
“The main question for the market is when  Libyan gas exports will resume,” said Thierry Bros, European gas and LNG analyst at French bank Société Générale (SocGen). “With little LNG supply growth expected in 2012-13, barring extreme situations, the market picture that develops in the second half of 2011 will continue for the next couple of years.”

With only Australia’s 4.3 million tonnes a year (t/y) Pluto LNG project and the 5.2 million t/y Angola LNG plant expected to start up between now and 2014, SocGen said very little new supply is coming to market – commissioning of Pluto has been delayed again, to March 2012 instead of later this year. 

Guzzling the glut

Consultancy Wood Mackenzie estimates the shutdown of Greenstream has removed 8 billion cm/y of gas from the market, while the nuclear problems in Japan (increasing that country’s demand for gas imports) has siphoned off 12 billion cm of LNG supply which may have gone to Europe.

For world markets, the effect could be significant, dramatically reducing the global glut of natural gas. “The global oversupply of gas, previously forecast to end in 2015, will now likely end in 2013, or possibly as early as 2012. This oversupply is most obvious in Europe, which has become the market of last resort for LNG supply,” said Noel Tomnay, head of global gas at Wood Mackenzie.

The start up of the Netherland’s Gate LNG import terminal may also have significant implications for European gas markets – the plant, with initial regasification capacity of 12 billion cm/y, received its first commissioning cargo in June. “Gate is important not only because it provides more European import capacity, but it also allows the Dutch hub TTF to access international gas prices, through LNG, putting it in a stronger position to compete with the region’s main pricing hub, the UK’s NBP,” Bros said.

NBP challenge

“With access to LNG and increased storage capacity – the Bergermeer facility could be operational in 2013 – in the long run, TTF could become a significant competitor to NBP as the top gas-trading market in Europe.” The 4.1 billion cm Bergermeer storage site, which started selling long-term capacity in May, has pipeline links to the UK, German and French gas markets. 

The UK overtook Spain as Europe’s largest LNG importer this year and this is expected to remain the case for the rest of the year. Spanish LNG imports have fallen because of increased direct Algerian gas supplies through the new 8 billion cm/y Medgaz pipeline and reduced demand because of a weak economy.

The constant supply of LNG, even after the earthquake in Japan, has suppressed UK gas prices in recent few weeks. But price will rise this winter as tankers are diverted to Asia.

Barclays Capital gas analyst Kerri Madock said: “While LNG imports throughout the summer will be higher than last year – flows are averaging 87 million cm/d so far, compared with 44 million cm/d last year – the global LNG market will become significantly tighter in the fourth quarter, with the possibility of cargos being diverted out of Europe,”.

The UK has been importing increasing volumes of LNG in recent years. This year, it imported record volumes, exporting surplus supplies to Continental Europe and taking market share from  Russia and Norway.  Kwok W Wan, London

Also in this section
Plastics recycling technologies compete in circular economy
14 March 2019
A backlash against single-use plastics is encouraging recycling into intermediate products and fuels, complicating world oil demand forecasts
Tankers steered back from the brink
8 March 2019
A recent spike in rates has rescued tanker owners, but the reprieve could be short-lived
Shipping’s surge and splurge
7 March 2019
Spot rates should stay below 2018 peaks as more newbuilds come into service