Sunday, May 28, 2023
HomeGasEurope, Asia gas buyers switching to long-term supplies to beat volatile prices

Subscribe

To our FREE newsletter
Get all the latest maritime news delivered straight to your inbox.

Europe, Asia gas buyers switching to long-term supplies to beat volatile prices

Natural gas buyers in Asia and Europe are seeking to lock in supplies via long-term contracts as a buffer against volatile global prices, industry executives said, in moves that will reverse the last decade’s trend of increasing spot purchases.

Fears of disruptions in Russian gas to Europe and low inventories led the continent to import record volumes of spot liquefied natural gas (LNG), driving prices to all-time highs earlier this year and sparking energy security concerns among buyers globally.

Years of low investments mean new supplies are scarce while Russian supplies are at risk just as more countries have switched from coal to gas to meet climate targets over the past couple of years when LNG prices had been low.

“We see a higher demand now than we had two years ago, definitely, so more interest for longer term contracts, energy security,” Peder Bjorland, vice president natural gas marketing and trading at Equinor ASA told Reuters on the sidelines of the World Gas Conference.

He added that European buyers for pipeline and LNG are seeking supplies over a five to 10 years’ time frame while longer term contracts spanning 15 to 20 years are more attractive for Asian markets.

The duration of LNG contracts is a sticking point in talks between Qatar and Germany for term supplies.

However, European buyers may go through middlemen to bridge the gap, Anne Mai Hatlem, vice president of LNG at Equinor, said.

“For Europe, we see more companies actually signing up for longer term deals and that might be a sign of realism related to how fast can we phase out gas from the market,” she said.

VOLATILE PRICES

Asian spot LNG prices have fallen about 50% from an all-time high in December, but are up nearly three-fold from levels seen in May 2021 as prices have rallied on tight global supplies with European buyers switching out of Russian natural gas for LNG following the Ukraine conflict.

Price volatility will likely remain given the uncertainty over Russian gas supplies to Europe and weather conditions, industry executives said. While this drives buyers to lock in supplies, it has also become a stumbling block between sellers and buyers to close deals.

“There’s a lot of demand for more LNG, obviously, and I think it’s very difficult in high volatility to agree on price… Because the buyers will always tell you that these are unnaturally high, and the sellers will say, this is the way things are for a while,” said Kevin Gallagher, chief executive officer of Santos Ltd.

Various benchmarks are also used in long-term contracts with oil-indexation still favoured in Asia while more regional markers are being used depending on the origin of supplies to offset margin call risks.

“You see U.S. projects actually offering TTF pricing, for example, on their projects and you see more Asian companies willing to buy on a Henry Hub pricing,” Equinor’s Hatlem said, referring to Dutch wholesale prices and the U.S. price marker.

“So there are again mechanisms in the market to take away some of the margin call risk on the longer term,” she said.

“Many companies are concerned about ensuring some protection if they are going into long term (deals) for the future.”

Source: Reuters

Related Posts

Video

Finance & Economy
Shipping News
Ports

Seanergy ‘well positioned to benefit from positive trend in Capesize market’

Seanergy Maritime Holdings Corp., announced its financial results for the first quarter ended March 31, 2023, and declared a quarterly dividend of $0.025 per...

Dorian LPG sees Q1 revenue more than double year-on-year

Dorian LPG reported its financial results for the three months and fiscal year ended March 31, 2023. Highlights for the Fourth Quarter Ended March 31, 2023 Revenues of $133.6 million.Time...

Navios Holdings Posts $14.5 Mln Net Income in Q1

Navios Maritime Holdings Inc., reported its financial results for the first quarter ended March 31, 2023. Navios Holdings owns (i) a controlling equity stake...

BW LPG posts ‘strongest quarterly performance on record’

BW LPG has recorded its ‘strongest quarterly performance on record’ in the first three months of 2023. The company was boosted by strong exports...

ONE, Wan Hai agree to pay civil penalties to FMC

Ocean Network Express (ONE) will pay a US$1.7 million civil penalty to avoid a formal investigation by the US Federal Maritime Commission (FMC) for...

Nikolaus H. Schües elected BIMCO President

BIMCO has elected Nikolaus H. Schües , CEO and owner of Reederei F. Laeisz,...

Baltic Dry Bulk Index Ends Worst Day In Over Three Months

The Baltic Exchange’s main sea freight index declined the most since mid-February on Thursday...

Maritime UK appoints new Chief Executive Officer

Maritime UK, the umbrella organisation for the UK’s maritime sector, has appointed Chris Shirling-Rooke...

Baltic dry bulk index extends slide for 10th straight session

The Baltic Exchange’s main sea freight index of shipping rates for dry bulk commodities...

Baltic index hits over two-month trough on lower rates across vessels

The Baltic Exchange’s main sea freight index slumped to its lowest level in over...

DP World Completes Terminal Expansion Project Vancouver Port

DP World has completed the AED954 million ($259.78 million) Centerm expansion project, increasing container throughput at the Port of Vancouver by 60 percent. The terminal...

DP World completes AED 954 million Vancouver port expansion

DP World and the Vancouver Fraser Port Authority have celebrated two historic events – the completion of the Centerm Expansion Project at DP World...

Alexandroupolis port gets 24 million euros of EU funding

Greece has secured 24 million euros ($26 million) in European Union funding to upgrade its northern Aegean Sea port of Alexandroupolis, privatisation agency HRADF...

Port Hedland Iron Ore Exports Down 5% in April

Pilbara Ports Authority (PPA) has delivered a total monthly throughput of 57.7 million tonnes (Mt) for April 2023. This throughput was a two per cent...

APM Terminals Reveals $1 Billion Investment in Brazil

APM Terminals’ CEO Keith Svendsen has pledged an investment of about US$1 billion in the company's Brazilian operations up to 2026. The amount includes around...