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In Europe, began to abandon LNG from the United States

In February, US LNG shipments to Europe fell by half. At low gas prices, companies in the EU cannot sell it and refuse to receive liquefied gas even under long-term contracts with penalties.

Spanish Naturgy refused to receive two LNG cargoes (about 200 million cubic meters) from the US Sabine Pass LNG terminal. This was reported by Bloomberg with reference to market participants.

“The shipments, one of which was planned for April, were canceled by Naturgy customers, Repsol SA and Endesa SA. Although they will have to pay at contract rates, the market reported, ”writes Bloomberg.

Meanwhile, S&P Global Platts told U.S. producers of liquefied natural gas that they had no problems selling their products. However, bad statistics for LNG from the USA are also confirmed by the data of consulting agencies. Thus, according to the ICIS information platform, US LNG supplies to Europe have fallen by half compared with November — January. If in previous months deliveries exceeded 2 million tons (2.8 billion cubic meters), then in February they will amount to slightly more than 1 million tons (1.4 billion cubic meters).

“The difference between gas prices in the US and Europe has almost disappeared and it was a matter of time until someone started to refuse cargo,” wrote on Twitter Nikos Tsafos from CSISEenergy.

“The fact that world prices for LNG cover at the limit even operating costs for the production of LNG from American gas has been clear for quite some time. Especially now, when Henry Hub prices pushed from the bottom at $ 1.8 per million BTUs due to cold weather forecasts and are moving towards $ 2, the analyst comments on Facebook Alexander Sobko. – The calculation is simple. We add to this price 15% of operating costs for liquefaction and 1 dollar of delivery to Europe. We get $ 3.3 / million BTU of operating costs, and prices in Europe are now at $ 3. Do not forget that in any case, importers of American LNG pay a fixed cost of liquefaction of $ 2.25-3.5 dollars (for Naturgy – the price is $ 2.5), regardless of whether they buy LNG or not. That is, the full cost has long been unprofitable in relation to the selling price at spot prices. ”

The situation is even worse in the Asia-Pacific region (APR), where prices are the same as in Europe, but delivery is more expensive. Eadaily wrote that all hopes LNG producers pinned on the Chinese market, however, due to an outbreak of coronavirus, consumption in the country collapsed and state-owned companies in China also refused to supply LNG, which, due to a sharp decline in consumption, simply has nowhere to store. Traders told Bloomberg that two Japanese buyers are currently considering the possibility of refusing to purchase LNG from the United States.

American exporters may have to suspend the supply of liquefied natural gas over the next seven months, despite Germany’s accelerated transition from coal to natural gas, said BloombergNEF, an energy market research organization.

“In the first half of the 2020s, we can expect a respite in constant“ excess ”and a price adjustment,” said Alexander Sobko. – Factories have been under construction for 4–5 years, the inertia here is great, and just as massive investments in 2011–2015 ensured the current excess, so underinvestment in 2016–2018 minimizes the launch of new plants in 2021–2024 and corrects the current imbalances. “

As reported Eadaily , this year the United States plans to throw an additional 29 billion cubic meters of gas into the world market in the form of LNG. And if China does not fulfill its promises to increase the import of American gas several times, then Europe will not be able to digest additional volumes. Back in October, an analyst at the Oxford Institute for Energy Research Mike Fulwood predicted that by the summer of 2020, gas prices in Europe, which is the main market for Gazprom, will fall to $ 70 per thousand cubic meters. “Europe has long been a balancing market for global LNG supplies and has performed very well over the past 12 months, importing 105 billion cubic meters – 75% more than in the previous period. During this time, prices on the TTF and NBP exchanges fell to less than $ 140 per thousand cubic meters in the third quarter. Europe has absorbed surplus LNG, reducing coal consumption during energy generation and filling storage facilities. If the coming winter will be normal in temperature and even slightly cooler, and gas demand in Asia will increase, then Europe will again be able to consume surplus LNG. However, in the case of warmer winters and weak growth in Asia, we will see weak gas withdrawal from storage facilities and low demand for filling them next summer. Such a scenario threatens to drop prices in Europe to $ 70 per thousand cubic meters next summer, ”an analyst at the Oxford Institute for Energy Research wrote in a report.

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