UK becomes global “ LNG sink ”
A recent surge in LNG imports to the UK suggests the island nation is becoming a “ sink ” to absorb any global surplus of the chilled fuel .
By Laurence Walker
UK LNG imports swelled to a record monthly high in January , helping to ease concerns about low storage levels and high prices of natural gas . And more cargoes are on the way , analysts say . At 3.5bcm in January , the UK ’ s LNG imports were nearly 80 % higher than in December and nearly five-fold higher year on year , according to VesselsValue estimates . Of the total , around 2.1bcm arrived from the US , followed by Qatar and Russia , with 0.5bcm and 0.3bcm , respectively .
“ We saw record cargoes in January and are so far expecting at least 15 in February , so LNG really did come to the rescue ,” says Wayne Bryan , director of European gas research at Refinitiv . “ It ’ s eased market concerns , even with the tensions on the Russia-Ukraine border ,” he adds , in reference to fears of a possible Russian invasion of Ukraine and any potential geopolitical or economic fallout , such as Russia cutting its gas supply to Europe .
LNG arrivals are welcome in a beleaguered British energy market struggling with a lack of available renewable energy capacity and a mostly retired coal-fired plant fleet at a time of strong demand . “ As has happened frequently over the past 10 years , when the global
12 market is oversupplied , northwest Europe – and specifically the UK – becomes the sink for surplus LNG ,” says an analyst with a UK energy consultancy , who asked to remain anonymous .
He notes this had been the case in December 2019 , and again in March 2021 . “ It rarely happens for more than a couple of months before the market rebalances , or extra demand surfaces in Asia or Latin America .” But the reason why the UK had become the market of choice for “ desperate sellers ” was that the country had excess import capacity , which was generally operating at well under 50 % utilisation , he says .
“ The UK also has outlets to soak up additional gas supply , be it gasfired power generation , mid-range storage , or exports to Belgium and the Netherlands where it can be used or stored as gas ,” he says , noting market entry was very simple , with hedging via futures exchanges also “ easy to do ”.
“ The big question is , when will the tide turn once again and LNG cargoes be whisked away to other regions ,” he says . Yet this is unlikely to occur until the so-called shoulder period , between winter heating and summer cooling seasons , potentially from April .
Montel Magazine 1 – 2022