China remains largest buyer of spot and short-term gas with 25pc gross increase
By Sudeep Sonawane
February 14, 2022
The International Energy Agency’s 2022 first quarter report that highlights last year’s results says global gas trade grew by a record 9 per cent in 2021.
The agency’s initial estimates indicate the world’s gas business – LNG and long-distance pipeline supplies grew over 85 bcm.
The agency’s report gathers data of oil, gas, coal, renewable energy, electricity markets, energy efficiency, access to energy, and supply and demand chain.
The agency’s report authors state “this represents the largest year-on-year increase on record”. Strong gas demand in Asia Pacific, Europe and South America propelled the increase.
Long-distance pipeline flows surged by 12% (or 55 bcm) year-on-year, accounting for almost two-thirds of global gas trade growth in 2021. This surge recovered losses that occurred in 2020 because of the global lockdown.
Europe drove this surge with pipeline imports rising 11per cent (or over 30 bcm) y-o-y. A combination of higher gas demand, plummeting domestic production and lower LNG inflow triggered this.
Norway’s pipeline deliveries to the rest of the continent rose by 5% y-o-y, while pipeline imports from North Africa increased by over 50% y-o-y. Azerbaijan flows into Europe surged by 20% y-o-y, driven by the ramp-up of the Trans Adriatic Pipeline [TAP] built in 2016 and working since 2020.
The Southern Gas Corridor’s European section of 878-kms long TAP starts from the Caspian Sea in Azerbaijan and passes to Europe from Greece through Albania and the Adriatic Sea to Italy.
Azerbaijan holds 35 trillion cubic feet(Tcf) gas reserves or, around one per cent of the world’s total natural gas reserves of 6,292 Tcf, according to worldometers.info. The Central Asian country’s proven reserves are 95.8 times its internal annual consumption. It has around 96 years of gas left at current consumption levels, the site says.
The Russian Federation’s pipeline exports to Europe rose by 4% y-o-y, supported by a strong increase in deliveries to Turkey, while flows to the European Union fell below 2020 levels on lower transit flows via Belarus and Ukraine.
China’s pipeline imports from Central Asia rose by an estimated 10% y-o-y, while deliveries
from Russia via the Power of Siberia pipeline more than doubled, reaching 10 bcm in 2021.
China’s imports recorded a strong 17% increase, overtaking Japan for the first time in 2021 as the world’s largest LNG importer.
North America pipeline trade rise 11pc
Net pipeline trade in North America rose by 11% y-o-y, driven by higher exports from the United States to Mexico, and soaring imports from Canada to the United States.
Global LNG trade expanded by 6% in 2021, a sharp acceleration from the 2020 growth rate of 1%. This import growth was led by the Asia Pacific region, which registered an 8% y-o-y increase driven by factors such as the early 2021 cold spell in Northeast Asia and a strong economic recovery.
LNG imports into Central and South America soared by 69%, supported by Brazil’s severe drought curtailing hydro-power generation. North America continued to lead the
expansion of global LNG exports, with a 51% increase in output after widespread cargo cancellations in 2020.
LNG trade growth was partly driven by spot and short-term LNG procurement, which accounted for 67% of the incremental trade volume. Consequently, the share of spot and short-term LNG in global LNG trade rose to 38% from last year’s 36%.
China accounted for 25% of the gross increase in short-term LNG imports, and remained the largest buyer of spot and short-term LNG.
The United States retained its position as the largest provider of spot and short-term LNG in 2021 with a global share of 29%, the country accounting for almost half of gross growth in short-term sales.
Global gas use rebounds 4.6pc in 2021
Global natural gas consumption rebounded by 4.6% in 2021, more than double the decline seen in 2020. The strong demand growth in 2021 was driven by the economic recovery that followed the previous year’s lockdowns and by a succession of extreme weather events. Supply did not keep pace which, combined with unexpected outages, led to tight markets and steep price increases, putting the brakes on demand growth in the second half of 2021.
The year closed with record high spot prices in Europe and Asia, as natural gas supply remained very tight.
The direction of short-term demand will depend on the weather during the rest of the northern hemisphere’s heating season. Assuming normal temperatures, growth of the natural gas market is expected to be slowed by higher gas prices and softer economic expansion, while supply tensions may ease as offline capacity gradually returns.
The exceptionally high gas (and by extension electricity) prices are likely to have an impact beyond just northern markets and the current season, with some ripple effects in both mature and emerging gas importing markets already visible.
Cold spells push gas price in Asia
Uncertainty over prices and supply remained high as of early January, with most of the heating season still to come. Weather patterns are likely to remain the principal driver of both prices and volatility in the coming weeks, although there are also other physical, commercial and geopolitical factors at play.
Consumers reel as gas price soars
Exceptionally high gas – and by extension electricity – prices have hurt consumers, utilities and wholesalers, and are likely to have a lasting negative impact beyond the current seasonal tension.
The effects are not limited to Europe, as markets throughout the world experience the painful consequences of high gas prices. Emerging economies are particularly vulnerable, and are already experiencing power cuts, industrial demand destruction and potential food supply issues in the absence of affordable gas-based fertilisers.
The current market situation is a stark reminder for gas-consuming countries of the importance of implementing and updating their security of supply toolboxes, including policies to protect consumers and to optimise the use of gas infrastructure, especially storage.