By Nina Howell , Partner , Bracewell , London and Adam Quigley , Associate , Bracewell , London

OVERVIEW

This report provides an overview of current trends in the European LNG market , describes the status of the European LNG landscape in 2021 , and looks at current activities in individual LNG-importing countries in Europe .

CURRENT TRENDS IN THE EUROPEAN LNG MARKET

Bouncing Back ?

In our LNG in Europe Report 2020 ( published in October 2020 ), we commented on the significant impact that the COVID-19 pandemic had on the LNG sector in Europe ( and worldwide ). In the early months of the pandemic Europe actually imported more LNG than normal as it absorbed cargos which were diverted from Asian markets in lockdown , but by June 2020 European imports had slowed down significantly – European gas prices hit record lows of Euros 1 / MMBtu and LNG demand in Europe crumbled . At the time we were confident that LNG would have a resurgence in Europe , but we didn ’ t know when or at what pace .

Asian demand for LNG began to recover in August 2020 as the major Asian importing countries - China , Japan and South Korea - emerged from lock-down . This renewed demand triggered an increase in LNG prices for sales to Asia and a widening price spread between Asian spot LNG ( JKM ) and European hub prices ( TTF / NBP ), which in turn led to LNG cargoes being diverted from Europe to Asia .

In January 2021 , Asian spot prices hit a record high of USD 30 / MMBtu .

Europe ’ s LNG market had a slower road to recovery . Although European gas consumption rose by over 5 % year-on-year between 1 October 2020 and 30 April 2021 , LNG imports to Europe fell by almost 30 % ( or 20 bcm ) during the same period . Northwest Europe ’ s LNG imports declined the most in this period , falling by 37 % ( year-on-year ), while southern and eastern European LNG markets fell by 20 % ( year-on-year ). In January 2021 , European LNG imports fell by almost 50 % year-on-year to their lowest level since September 2018 , and stayed depressed in February 2021 . During this period Europe ’ s increased gas demand was met by pipeline deliveries as global LNG supply was unloaded in higher-priced Asian markets . Unlike most of Asia , Europe has access to huge volumes of pipeline gas as well as higher levels of gas storage capacity than other parts of the world . In fact , the flexibility in European gas supply sources helped balance the global LNG market on its road to recovery . By March 2021 , Europe ’ s LNG imports were returning to more normal levels , which continued in Q2 2021 . The European LNG picture during the summer of 2021 to date ( mid-August 2021 ) is mixed . Despite TTF and NBP prices reaching all-time highs of nearly USD 14 / MMBtu ( potentially reasserting Europe as a viable end market ), send-out from European regasification terminals in July 2021 fell by 70 % against May 2021 levels as LNG cargoes continue to be directed to Asia where prices currently sit at around USD 16 / MMBtu .

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