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Tight production capacity for liquefied natural gas could lead to shortages next winter, the head of the International Energy Agency, Fatih Birol, has warned.
As gas demand from China begins to recover, competition for LNG supply will increase, creating the risk of shortages, Birol told Reuters on the sidelines of the Munich Security Conference.
The head of the IEA praised European governments for making “many correct decisions” last year to secure supply, including the construction of more LNG import terminals. He noted, however, that the mild winter had been a stroke of luck for Europe, combined with the demand drop in China amid last year’s lockdowns.
"For this winter it is right to say that we are off the hook. If there are no last minute surprises, we should get through...maybe with some bruises here and there," Birol told Reuters. "But the question is...what happens next winter?"
The official noted that some 23 billion cubic meters of natural gas are expected to be added to the global LNG supply this year, which would be equal to some 16.8 million tons. Yet even a moderate recovery in China’s economic activity would absorb 80 percent of that additional supply.
Birol then went on to say that this meant Europe may end up short of gas for next winter, saying "Even though we have enough LNG import terminals, there may not be enough gas to import and therefore it will not be easy this coming winter for Europe," adding that "It is not right to be relaxed, it is not right now to celebrate".
Europe is about to end winter 2022/23 with record high levels of gas in storage, which theoretically means it would need to buy less for the next heating season. Still, last year’s refill purchases featured a solid amount of Russian gas that will not be available this year and will need to be replaced.
By Irina Slav for Oilprice.com
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Irina is a writer for Oilprice.com with over a decade of experience writing on the oil and gas industry.