Tight production capacity for liquefied natural gas could lead to shortages this winter, International Energy Agency head Fatih Birol warned.
As demand for gas from China begins to recover, competition for LNG supply will increase, raising 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 the right decisions” last year to secure supplies, including building more LNG import terminals. However, he noted that the mild winter had been a stroke of luck for Europe, coupled with declining demand in China during last year’s lockdowns.
“For this winter, it’s good to say we’re off the hook. If there aren’t any last-minute surprises, we should get through it…maybe with some bruises here and there,” Birol told Reuters. “But the question is… what happens next winter?”
The official noted that about 23 billion cubic meters of natural gas is expected to be added to the global LNG supply this year, which would equal about 16.8 million tons. But even a moderate recovery in economic activity in China would absorb 80 percent of that extra supply.
Birol went on to say that this could mean Europe running out of gas next winter, saying: “While we have enough LNG import terminals, there may not be enough gas to import and so this coming winter won’t be easy for Europe”, adding that “it’s not right to be relaxed, it’s not right to celebrate now”.
Europe is about to end the winter of 2022/23 with a record high of gas in storage, which in theory means it should buy less for the next heating season. Still, last year’s refill purchases contained 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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