By Marwa Rashad

LONDON (Reuters) – U.S. liquefied (LNG) exporters are emerging as big winners of Europe’s supply crisis as they export record volumes to the European Union for the third consecutive month at prices that have rallied since Russia’s invasion of Ukraine.

    European gas prices have hit all-time highs just as exporters of LNG in the United States completed projects that had been under development for years to deliver abundant shale gas supplies to international markets.

Traders said that Cheniere Energy, America’s largest exporter of LNG, is one of the biggest beneficiaries, having recently signed a number long-term LNG sales contracts.

After having diverted cargoes originally intended for Europe to other markets, commodities traders like Gunvor and Trafigura are seen as big winners.

Russia is an important oil exporter in the world and a supplier of approximately 40% of Europe’s natural gas.

    “The U.S. and its LNG producers profit from the gas shortage in Europe and will further profit if Russian volumes are sanctioned,” a European trader said.   

Reuters reached Trafigura, Gunvor but they did not reply to our request. Cheniere wasn’t immediately available to comment.

They rose to $60 for a record number of British thermal units (mmBtu), which is close to 10 times the value they were a year ago. They hover at $51.

The United States announced Tuesday that it would ban Russian oil and gas exports as a retaliation to Moscow’s invasion. Prices are likely to rise again. Britain is expected follow the lead.

U.S. Energy Information Administration predicts that U.S. LNG Exports will exceed 11.4 billion cubic foot per day (bcfd), in 2022. Analysts at Goldman Sachs (NYSE 🙂 estimate that this would represent approximately 22% of the world’s expected LNG demand of 53.3 billion cubic feet per day next year. It would surpass Australia and Qatar which are currently the largest exporters.

The European LNG market has seen prices rise so high that European traders would prefer to pay penalties of millions of dollars for not delivering LNG to their countries to be able to offer the cargoes to European buyers at a premium price, according to Oystein Kalleklev chief executive officer of FLEX LNG Management.

    Two sources at a major energy firm, who asked not to be named, said that over the past three months the United States has diverted several dozen cargoes to Europe from their previous Asian destinations. The typical cargo contains about 3 billion cubic yards of natural gas.

    The total number of U.S. cargoes shipped to Europe and Turkey in the first two months of 2022 reached a record of 164, according to Robert Songer, LNG analyst at data intelligence firm ICIS. He said that the previous record stood at 125 cargoes shipped to Europe and Turkey in 2020’s first quarter.

    The 6.4 million tonnes of LNG exported from the United States in February, equivalent to around 307 billion cubic feet of gas, would have been worth about $17.2 billion in Europe at $56 per mmBtu or $13.5 billion in Asia at $44 per mmBtu, according to Reuters calculations.

U.S. cargoes to Europe hit new record in Q1-22 https://graphics.reuters.com/USA-LNG/EUROPE/egvbkqjgzpq/U.S.%20cargoes%20to%20Europe%20hit%20new%20record%20in%20Q1-22.jpg

SPURNED BY OTHER BUYERS

   Developing countries such as Pakistan are struggling to compete with the high prices that Europe is prepared to pay for LNG, leaving them reliant on dirtier fuels such as coal to meet power demands.

“Markets like Pakistan, Bangladesh, etc. During prolonged LNG price spikes, we will see a shift towards increased fuel oil and coal use.

    Eni and Gunvor, both long-term suppliers of gas to Pakistan, were unable to deliver scheduled cargoes for March, an industry source told Reuters, forcing the South Asian country to buy LNG cargoes from the spot market.

Eni couldn’t meet its obligation because the supplier of three of its cargoes, Trafigura, cancelled and sent the ships to Europe instead, an industry source told Reuters.

    “Trafigura would rather pay the penalty fee, which is around $11-12 million, and sell the gas on spot market at today’s prices,” the source said.   

Eni stated that it is evaluating legal remedies and contractual solutions to protect its rights.

    A source with knowledge of the matter said Trafigura had the right to cancel the cargoes for a fee.