Energy giants BG Group have warned that Europe’s liquified natural gas market has fallen to its lowest volumes in a decade as demand globally saw resources diverted elsewhere.
Increased appetite for imports from Latin America and Asia saw just 35million tonnes of LNG reach Europe last year – a drop of more than 45% compared to peak import volumes of 66million in 2011.
And the firm warned that while European demand would fall to compensate growth markets, global demand is set to overtake production levels in the long term.
“Today we are in the midst of a LNG supply hiatus,” said BG Group vice president of LNG Andrew Walker.
“Developing new supply, rather than demand, is the principal challenge the industry faces.
“Limited supply growth in 2013, the prospect that overall production will remain stalled in 2014 and strong demand growth in Asia suggests the global LNG market will continue to tighten, in line with our long-held view.
“Reflecting the tight underlying market, we expect LNG spot prices, assuming normal weather, to remain robust through 2014. In fact, we believe the global LNG market will be tighter for longer than many assume, until the end of the decade at least.”
Demand from China, Korea and Mexico was strongest last year, while pipeline supplies of gas to Europe increased last year, but total supply of LNG had stalled as the industry looks for new production output to come onstream.
The firm, which has heavily invested in LNG projects around the world, said that it expected only a modest increase in global supply for 2014 after unplanned outages and natural decline saw 2013’s rise reach ‘negligible’ levels.
“In 2014 we expect Europe will continue to balance the global LNG market by ceding volumes, but it’s not clear how much more can be diverted before we reach the minimum level of imports,” warned Walker.
“When that floor is reached, LNG will likely be drawn from other, more price-sensitive markets in periods of peak demand. In time, we may see these markets assume Europe’s position as the balancing market for global LNG demand and supply.”
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