Europe has been importing record volumes of LNG this year to replace pipeline gas from Russia, and LNG supply will go a long way in ensuring most of the lost Russian supply is replaced, popular hedge fund manager Pierre Andurand told Bloomberg’s Odd Lots podcast.
At the current pace of Europe’s liquefied natural gas imports, LNG supply corresponds to about two-thirds of lost Russian supply, Andurand said.
Moreover, the hedge fund manager added that Europe is adding more import capacity to welcome more LNG cargoes this winter.
Countries across Europe are looking to charter floating storage regasification units (FSRUs) for LNG imports to secure gas supply for the next few winters until the EU makes meaningful progress in cutting gas consumption through energy efficiency measures and boosting hydrogen and renewable gas use. In the Netherlands, gas provider Gasunie is building a floating LNG terminal in Eemshaven in the Groningen area, and this terminal is expected to be operating at full capacity by late November or early December. Germany, for its part, has already chartered five FSRUs since May, with two of those, at Wilhelmshaven and at Brunsbüttel, expected to begin operations as early as the end of this year.
Import capacity in Europe would not be an issue. The issue will be how much LNG Europe can procure for itself, considering that it is competing with countries that have long-term LNG supply contracts, Andurand told the Bloomberg podcast.
While LNG supply will replace a large part of Russian gas, it will not replace all the Russian gas, so Europe needs a demand response to rebalance the market, Andurand said. This is already evident with industry switching to oil from gas, and gas demand from the industry has already declined because of that switch.
“We will lose some natural gas demand worldwide due to very high natural gas prices,” Andurand said.
He added that demand responses include households turning down the thermostat to 19 degrees Celsius (66.2 F) from 22 degrees Celsius (71.6 F).
By Tsvetana Paraskova for Oilprice.com
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