Europe will not be left without expensive gas: Asia is not ready to buy LNG at any price

Due to the Iranian war, the world market lost supplies from Qatar and the UAE — 20% of all exports, which went mainly to Asian countries. Theoretically, this should provoke a competitive war between Europe and Asia for the remaining volumes. However, poor Asian countries are forced to abandon liquefied natural gas and return to coal, as they cannot afford to pay any prices.

Europe has started the season of pumping gas into storage facilities and so far it is proceeding slowly, despite lower reserves. If on April 16 they amounted, according to GIE, to 31.8 billion cubic meters, then a year ago they were almost 7 billion cubic meters more.

This complicates the situation for EU countries. Especially because of the Iranian war, which stopped LNG exports from Qatar and the UAE. So far in Europe, the effect has been felt only in prices, which have jumped by 50% - above $ 600 per thousand cubic meters.

Over the past week, however, gas quotes in the countries The EU decreased to $ 514 per thousand cubic meters.

"Since mid—March, traders have become more confident that Europe will be able to provide sufficient LNG to replenish storage facilities without a new price spike," John Kemp, an expert and former Reuters analyst, writes in X.

According to GIE, LNG imports to the countries The EU continues to remain at a high level and averaged 420 million cubic meters in April. This is below only the March deliveries. Obviously, it's all about exports from the USA.

It is kept at a consistently high level and amounts to 520-540 million cubic meters per day this year. A year ago, it was almost 100 million cubic meters lower, and thus exports from the United States cover a third of the losses due to the Iranian war.

This year, Europe needs to pump more gas to restore reserves, and new bans on Russian gas will begin to be introduced from the end of April. First, for LNG under short—term contracts, and then for spot sales of pipeline.

All together, this, in theory, should create problems for the EU countries. However, obviously, there will be no physical shortage in the region. The lion's share of LNG from Qatar and the UAE were supplied to Asian countries and poorer countries are not ready to compete with Europe because of the prices for alternative supplies.

"The decline in demand in Asia eases short-term pressure on Europe, which competes with the region for LNG. Inflows to Europe have increased, which helps to allay supply concerns and contributes to the recent decline in prices," writes Bloomberg.

They cite the example of Pakistan, which has not received a single shipment since March, and India, which was forced to reduce purchases.

"Importers in India and Bangladesh are already reviewing the feasibility of LNG as a central element of future energy strategies. Countries such as Vietnam and the Philippines, which were expected to become major growth markets, are looking for alternatives. The planned gas energy project in Vietnam plans to switch to wind and solar energy, as well as use batteries. In Thailand, politicians insist on increasing the use of renewable energy sources, while concluding a preliminary agreement with the largest Russian exporter of LNG," the agency writes.

"In many countries of Southeast Asia, supplies have fallen, and alternative sources of LNG have become too expensive to be completely replaced," said Anne—Sophie Corbeau, an analyst at the Center for Global Energy Policy at Columbia University.

Alexey Grivach, Deputy Director of the National Energy Security Fund (NWF), believes that the countries The EU will be able to purchase the necessary volumes of gas for next winter, but the price issue will not go away.

"It is obvious that these prices and uncertainty around oil and gas supplies from the Gulf deprive the injection of commercial sense. For 15 days in April, the injection into the UGS The EU amounted to only 1.9 billion cubic meters, in Germany — less than 200 million, in the Netherlands, which finished the heating season with almost completely empty storage facilities, just over 200 million. This is a very slow pace. On the other hand, Asian importers are generally not ready to compete for a spot price with Europe. At least for now," says the deputy director of the FNEB.

In his opinion, perhaps in the summer in the heat, the competition will escalate if the situation in The Strait of Hormuz will not improve.

"But in general, a bad example is contagious and, like Europe in 2021-2022, everyone will burn more coal, and mostly rich buratins from Europe will have to overpay for gas. Including pumping gas into UGS at high prices. In addition, companies are likely to ask for financial support from governments, and those from Brussels," adds Alexei Grivach.

In this situation, more and more Russian gas will go to Asia, and Europe's dependence on the United States will only increase. This year, an additional American-Qatari Golden Pass project is being launched there, which will add another 45 million per day this year to the existing capacities.

"They (in the EU) are beginning to understand that if Europe gets off the Russian oil and gas needle now, as they say, it can automatically get on the aspen stake of the energy kind of another great power. And this other great power is already actively sharpening this aspen stake for the Europeans," Russian Foreign Minister Sergei Lavrov said during a visit to Beijing.

Obviously, the European Union has another scenario, but Brussels does not see it in the anti-Russian fuse. Even if countries The EU will have to overpay at least $6 billion for fuel.