The northern hemisphere cold snap completely overturns the gas market
Audio 02:00
An LNG (liquefied natural gas) LNG carrier arrives at a port in Yokohama, southwest of Tokyo, Japan.
(Illustrative image) © AP - Koji Sasahara / File photo
By: Claire Fages Follow
5 mins
The sudden onset of winter in Asia and Europe is causing gas shortages from Pakistan to Japan.
Spot prices for liquefied natural gas are propelled to record levels, when they were at their lowest in March 2020, because of the Covid-19.
LNG producers have for the first time reduced their summer production.
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The cold wave in the northern hemisphere has completely turned the gas market upside down.
The drop in temperatures surprised many countries in Asia, very dependent on imports of liquefied natural gas and which had not taken their precautions.
Gas had been so cheap since last March on the spot market that importing countries expected to continue buying it as and when needed.
Two months ago, India even gave up on its long-term supply agreement with Tellurian.
Today she struggles to provide herself.
India and Pakistan had abandoned long-term contracts
Same thing in neighboring Pakistan.
The country is suffering from a real shortage of gas and therefore of electricity, which turns into a political crisis.
The population uses fuel and wood for cooking and heating.
Even Japan, which imports all its liquefied gas by boat, also lacks power for its power plants, while its nuclear reactors are still not working at full capacity.
Everyone wants LNG when there is no longer it on the market.
For the first time in their history, in fact, the gas liquefaction units, from Australia to the United States, stopped this summer to limit surpluses and financial losses, after the plunge in spot prices in the month of March because of the Covid.
Produce less to earn more, a new mantra for the LNG industry
“
Out of 150 billion m3 of unused gas capacity in the world, 50 billion m3 have been put on hold by LNG producers, or the equivalent of French consumption
, underlines sector specialist Thierry Bros.
It's a new model for the LNG industry: produce less to earn more.
By not producing this summer, they erased the coronavirus effect.
They would have produced this summer we would not have the high prices we have today.
"
A warning for importing countries
In Asia the million Btu reached 25 dollars against less than 2 dollars last March!
LNG carriers cannot be found at less than $ 200,000 a day, three to four times more than 4 months ago, observes expert Pierre Terzian.
Price anomalies that are not going to last, he says, but that are a warning that the spot market cannot solve all problems.
But today, with contracts of less than three years, it represents 25% of the world gas market, which is a lot.
While the share of long-term contracts is only 75%.
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