What will Europe do with the rapid rise in LNG prices

Alexey Gromov, Principal Director on Energy studies at the Institute for Energy and Finance, commented to Forbes on the European gas market after the suspension of LNG supplies from the Middle East due to the closure of the Strait of Hormuz.

Gas prices in Europe reacted primarily to the fact that Qatar suspended LNG production, which has not happened so far, Alexey Gromov notes. According to his calculations, Europe consumes no more than 10% of Qatar's LNG, 80% goes to Asia. If supplies from Qatar are stopped, the expert says, competition for gas volumes between markets may arise. Asian countries, primarily Japan and South Korea, are used to expensive gas, they are ready to accelerate prices in order to choose the volumes they need, paying more than the Europeans offer, the analyst says.

Gas prices in Europe will remain high in the coming months, the expert believes. Consumers will take cheap gas from storage facilities, but they will have to be filled with more expensive ones.

The beneficiary in this situation will be primarily the United States: the cost of American gas, which they will export instead of Qatar, will increase, Gromov says. But their opportunities are not unlimited either — they are unlikely to be able to fully compensate for supplies from the Middle East.

Russia has production facilities that can significantly increase LNG supplies to the global market, the expert explains. But the increase in production at the Arctic LNG 2 and Yamal LNG projects is hampered by the difficult ice conditions with a limited number of tankers capable of overcoming the ice, the expert says. And the Sakhalin—2 project is operating at 100% capacity, he adds. The only chance to increase supplies are medium—tonnage LNG plants in the Baltic Sea, Portovaya and Cryogaz-Vysotsk, which are focused on the European market, Gromov says. But they were actually stopped after being included in the US and EU sanctions lists.

"If the sanctions pressure on these plants is eased, they will be able to supply about 1.5 million tons of LNG to the market," Gromov notes. "But these are very small amounts relative to the losses that Europe may suffer due to the shutdown of the Qatari plants."