Study: European LNG imports climb amid supply constraints
16 December 2022
A clear differential between prices for natural gas in the U.S. and Europe led to a sharp increase in exports from the U.S. to Europe – a trend that was established even before the Russian invasion of the Ukraine, according to a recent report.
Exports of LNG from the United States to EU-27 and the UK increased from 3.4 billion cubic feet per day (Bcf/d) in November 2021 to 6.5 Bcf/d in January 2022—the most LNG shipped to Europe from the United States on a monthly basis to date, according to data from the U.S. Department of Energy.
The U.S. Energy Information Administration reported that the United States became Europe’s largest source of LNG in 2021, accounting for 26% of all LNG imported by European Union member countries (EU-27) and the United Kingdom (UK). Qatar was a close second, supplying 24% of the region’s gas, with Russia following with 20% of the region’s LNG imports. In January 2022, the United States supplied more than half of all LNG imports into Europe for the month.
Natural gas supply challenges in Europe and the sizable price differences between natural gas produced in the United States and current prices at European trading hubs have caused the increasing exports from the U.S. to Europe.
Meanwhile, Europe’s on gas production has steadily declined because of production limits on the Groningen field in the Netherlands and declines in the mature fields in the North Sea. To meet demand, Europe’s natural gas imports, particularly from Russia, have increased in recent years.
Natural gas pipeline flows from Russia decreased during 2021. Pipeline receipts from Russia at the three main entry points (Kondratki in Poland, Greifswald in Germany, and Velke Kapusany in Slovakia) averaged 10.7 Bcf/d in 2021, compared with 11.8 Bcf/d in 2020 and 14.1 Bcf/d in 2019, according to data by Refinitiv Eikon.
Norway made up for some of the decline in Russian pipeline exports. Norway’s pipeline shipments to Europe increased from 10.4 Bcf/d in 2019 and in 2020 to 11.1 Bcf/d in 2021. Supply challenges in the European market have led to rising regional prices for natural gas.
The natural gas spot price at the Title Transfer Facility (TTF) in the Netherlands—the most liquid virtual natural gas hub in Europe—has been trading at all-time high levels. The TTF price averaged $28.52 per million British thermal units (MMBtu) from September 2021 through the first week of February 2022. The TTF price peaked at $60.20/MMBtu on December 21, 2021. Prior to this sharp price increase, the TTF price had averaged $9.28/MMBtu from January through August 2021, $3.28/MMBtu during 2020, $4.45/MMBtu during 2019, and $6.45/MMBtu from 2014 through 2018, according to data from the EIA.
Historically, spot natural gas in Europe has traded at prices lower than LNG spot prices in Asia. But more recently, natural gas prices in Europe have closely tracked LNG prices in Asia.
On some days, the natural gas price in Europe has exceeded the LNG price in Asia, attracting higher volume of flexible LNG supplies to Europe. LNG imports to Europe increased in December 2021 and January 2022, averaging 10.8 Bcf/d and 14.9 Bcf/d, respectively, partly in response to the price at TTF rising above LNG spot prices in Asia.