LNG in Europe 2020: Current Trends, The European LNG Landscape and Country Focus

We Know Energy ® Nina Howell , Partner , Bracewell and Adam Quigley , Associate , Bracewell

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

Before the Pandemic

The winter of 2018 / 2019 marked the beginning of a turbulent period for the global LNG sector as the combination of over-supply of LNG ( partly due to new supply from the US ) and weaker demand in Asia caused a significant drop in global delivered LNG prices . The trend towards an over-supply and low-price environment hit LNG suppliers ( and LNG exporting countries ) hard , however with 15 LNG importing countries , Europe was able to benefit from abundant lowercost LNG supply . The continued convergence of global gas and LNG hubs prices – which really started in early 2015 – has allowed Europe ’ s TTF and NBP markers to compete with Asia in attracting LNG volumes . Simultaneously , the ongoing reduction in Europe ’ s indigenous gas production has resulted in the continued growth in demand for gas ( including regasified LNG ) imports across the Continent .

Europe ’ s increasing prominence in the global LNG market continued throughout 2018 , 2019 and the first quarter of 2020 . Europe ’ s 15 LNG importing countries ( large- and small-scale LNG imports ) collectively held a 15.6 % share of the total global LNG import market ( net of re-exports ) in 2018 , demonstrating a 6.4 % rise on 2017 . In 2019 these European importing countries increased their global market share of LNG imports to 24.2 %, and the total volume of LNG imported into Europe increased by 75.6 %. In fact , every European country with an LNG import terminal increased its LNG imports in 2019 compared to 2018 . Qatar remained the largest exporter of LNG into Europe in 2019 , followed by Russia and the US .

The trend of increasing volumes of LNG being unloaded at Europe ’ s regasification terminals looked set to continue through 2020 despite a steep fall in wholesale gas prices globally during the second half of 2019 and in Q1 2020 .

Impact of COVID-19

The entire global LNG landscape changed as a result of COVID-19 . Asia ( notably China , Japan and South Korea ) was first to experience a dramatic reduction in demand for LNG as the pandemic triggered a steep decline in economic and industrial activity in the region . Asian LNG buyers sought to reduce their offtake commitments under long-term LNG SPAs by rescheduling ( or if possible cancelling ) cargos and exercising downward quantity mechanisms . As LNG storage tanks at Asian regasification terminals ( particularly in China and India ) reached “ tank-top ” a number of buyers claimed force majeure citing that they were physically unable to receive any more LNG .