Oslo-based consultancy Rystad Energy,has said global liquefied natural gas demand is expected to hit 436 million tonnes in 2022, outpacing the available supply of just 410 million tonnes.
It said in a statement that a perfect winter storm may be forming for Europe as the continent seeks to limit Russian gas flows.
Rystad said the supply imbalance and high prices will set the scene for the most bullish environment for LNG projects in more than a decade, although supply from these projects will only arrive and provide relief from after 2024.
The firm said the European Union’s REPowerEU plan had set an ambitious target to reduce dependence on Russian gas by 66% within this year, an aim that will clash with the EU’s goal of replenishing gas storage to 80% of capacity by Nov 1.
Rystad said that by shunning Russian gas, Europe had destabilised the entire global LNG market that began the year with a precarious balance after a tumultuous 2021.
It said the decision to sharply reduce reliance on Russian gas and LNG from current levels of between 30% and 40% will transform the global LNG market, resulting in a steep increase in energy-security based European LNG demand that current and under-development projects will not be able to supply.
Rystad senior analyst for gas and LNG Kaushal Ramesh said there simply is not enough LNG around to meet demand.
“In the short term, this will make for a hard winter in Europe. For producers, it suggests the next LNG boom is here, but it will arrive too late to meet the sharp spike in demand.The stage is set for a sustained supply deficit, high prices, extreme volatility, bullish markets and heightened LNG geopolitics,” he said.
Rystad said Mexico is well positioned for Asian exports due to geographical proximity and non-dependence on transit through the Panama Canal, and appears to be gaining momentum among Asian buyers.
It said at the same time, higher prices will slow Asian LNG demand growth in the medium term, which means the continent will remain dependent on fuel oil and coal.
In some scenarios, it said Asian LNG demand may be permanently dented, and deployment of renewables accelerated.