Joyce Lee, Florence Tan

DAEGU, South Korea (Reuters – Buyers and sellers of global liquefied (LNG), are anticipating more uncertainty in Russian supplies, as well as a murky demand outlook for Europe and China during peak winter season.

Russia invasion has led to Western sanctions being placed on Russia by the West. These fears have caused global energy security problems and pushed gas prices up to new highs. Moscow describes its actions as a military special operation.

According to executives, there is still uncertainty about whether further Russian supply cuts will occur to Europe. They also said that it is uncertain if Europe will be able to build new LNG import infrastructure at the right time in order to replace large volumes of Russian gas.

The question remains, when China will remove COVID sanctions that have reduced imports during the first five month of the year.

Steve Hill, Executive Vice President at Shell (LON) said that “there is a lot of uncertainty about the future.”

The Russian gas pipeline volume to Europe in 2021 can be converted into LNG equivalent. Add on LNG volumes that were delivered to Europe in 2021 and you get 200 million tonnes of LNG equivalent. It’s half of what the existing (global?) LNG industry is.

He said that infrastructure constraints have arisen as the gas flow from east to west has made things “more difficult than we thought”.

Peder Borland, Equinor vice president for natural gas trading marketing and market, stated that changing flow patterns have led to a strange market where certain countries such as Britain are oversupplied with gas, while there is not enough infrastructure in place to transport the gas to places like Germany.

The executives stated that this has caused a large price difference between the British National Balancing Point (British) and Dutch wholesale gasoline prices. This could encourage infrastructure investment to decrease bottlenecks. However, this infrastructure would be difficult to construct.

Germany has contracted floating storage units and regasification units to build an LNG terminal.

It’s an uphill battle against the clock. Although we believe the regas facilities may be ready by the beginning of the winter, it is not likely that they will. So that’s a very delicate balance,” said Michael Stoppard, global gas strategy lead at S&P Global (NYSE:) Commodity Insights.

According to executives, a severe winter in northern hemisphere might also increase competition for LNG from Asia and Europe, and drive prices up.

Anatol Feygin is executive vice president of Cheniere Energy (NYSE) and stated, “As the winter approaches,… markets such as Asia really begin to compete for these cargoes.”

An executive at a Chinese importer of gas said that buyers would be more prepared this winter than they were last year because European countries like Germany and Italy require minimum stock levels.

The buyers are building stockpiles in preparation for winter. These levels have supported Asian spot LNG prices nearly three-fold at their May 2021 levels. That is unusually high considering the low-demand second quarter.

The executive, who was not authorized to speak on company policy, stated that it isn’t as pessimistic as last year because everyone is getting ready for winter.