Europe’s increased LNG demand to affect global trade?

The decline in Russian pipeline gas flows and Europe’s increased demand for Liquefied Natural Gas (LNG), has intensified competition in Asia for limited new supply available over the next two years, as per Shell’s LNG Outlook 2023.

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The Russia-Ukraine war didn’t just affect Europe but also impacted energy markets across the world. As a solution to replace Russian pipeline gas imports, Europe switched to Liquefied Natural Gas (LNG), enabling a surge in demand and global prices.

According to Shell’s LNG Outlook 2023, year 2022 recorded the largest import growth in Europe and biggest drop in Asia and South America. European countries including UK imported 121 million tonne of LNG, an increase of 60% as compared to 2021. The LNG trade flows flipped in 2022 due to contraction in Chinese gas demand, a drop in South Asian imports and new US LNG supply, further supporting the Europe’s need for LNG.

Steve Hill, Shell’s Executive Vice President for Energy Marketing said, “The war in Ukraine has had far-reaching impacts on energy security around the world and caused structural shifts in the market that are likely to impact the global LNG industry over the long term”.

With a record surge in Europe’s demand for LNG, other buyers are forced to reduce their imports and switch to other fuels, generating more emissions. High LNG prices led to a drop in LNG imports in South Asian countries with Pakistan and Bangladesh importing fuel oil and India using more coal.