Goldman warns of likely Asia LNG price rise on European supply crunch (updated)

China HK Power Smart Energy

27/11/2024 05:20

(Updates with comments)
    By Florence Tan and Emily Chow
       SINGAPORE, Nov 27 (Reuters) - 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)
 ((emily.chow@thomsonreuters.com; Reuters Messaging:
emily.chow.thomsonreuters.com@reuters.net))