Expensive gas ≠ more LNG
Soaring costs curb European enthusiasm for US LNG
They say the cure for high prices is high prices. The spectacular global rally in natural gas prices since last summer, which was put on a war footing with Russia’s invasion of Ukraine, has duly reignited investor interest in liquefied natural gas (LNG) export projects. However, that economic maxim holds true only if the extra supply the market is calling for can be brought online – and there are signs that runaway cost inflation could undermine efforts to build new US LNG export projects intended to supply gas-shocked Europe.
European wholesale natural gas prices have come off recent highs thanks to the continued supply of Russian pipeline flows and strong LNG imports from the US and other global suppliers. But the halt of Russian gas to Poland and Bulgaria on 27 April and recent threats of reduced flows to Germany cast doubt on how long that will continue. Gas hub prices (which are diverging across the UK and EU due to unequal access to LNG) remain unseasonably elevated as the market…