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The global long-term LNG contracts before 2026 are sold out, top importer Japan says, amid heated competition for the fuel as Europe seeks to replace Russian pipeline gas supply.
The estimate of sold-out LNG deals emerged from a survey of Japanese companies conducted by the local trade ministry and cited by Bloomberg.
High spot LNG prices have priced out many Asian buyers this year as Europe has been bidding for supply and has become the primary destination of spot LNG supply out of the United States. At the same time, market volatility and uncertainties, and concerns about energy security, have prompted a growing number of buyers to seek long-term contracts.
The race for LNG supply could give rise to a second wave of U.S. LNG projects, but new supply will take time to develop, Kateryna Filippenko, Principal Analyst, Global Gas Supply, at Wood Mackenzie, said earlier this year.
But much of this new LNG supply, including from projects that have taken final investment decisions (FIDs) in previous years, is likely to come only after 2026.
Until around 2026, “Europe will have to compete with Asia for the marginal LNG molecule to satisfy demand – just as it is right now,” Filippenko noted.
“Competition between Europe and Asia for limited LNG will be intense until a new supply wave arrives after 2026. Prices will inevitably remain elevated until then.”
Japan, for its part, is a major LNG importer and is set to regain its status as the world’s largest LNG importer this year amid an unprecedented slump in Chinese LNG demand and imports.
Last year, China beat Japan to become—for the first time—the world’s largest importer of LNG. This year, China is set to give the ‘top importer’ title back to Japan amid lackluster Chinese demand due to the snap Covid lockdowns that have slowed industrial demand and economic growth.
By Tsvetana Paraskova for Oilprice.com
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Tsvetana is a writer for Oilprice.com with over a decade of experience writing for news outlets such as iNVEZZ and SeeNews.