After the massive influx of U.S. liquefied natural gas to make up for lower pipeline supplies from Russia amid high demand, Europe is running out of processing capacity for the gas, Reuters has reported.
Europe turned into the biggest market for U.S. liquefied natural gas over the past three months as concern about the geopolitical tensions around Ukraine prompted the EU to seek alternatives for Russian gas in case Moscow turned the taps off, even though Moscow has repeatedly said that it has no such plans.
Because of the increase in LNG shipments to Europe, the United States also overtook Qatar to become the world's largest exporter of the commodity earlier this year. In January, Europe took in over 16 billion cubic meters of American liquefied natural gas, and this month's shipments are also expected to remain elevated, with more than 6 billion cubic meters shipped since the start of February.
Right now, an estimated two-thirds of U.S. LNG cargoes are slated to be delivered to European destinations. Storage, however, is filling up, which means that soon, LNG shipments from the United States might start to decline.
"A few cargoes could be squeezed into some other countries, but not significant supply," Rystad Energy senior analyst Kaushal Ramesh told Reuters. This would require additional logistics, which, Ramesh said, would "burn a hole through buyers' pockets, again."
The European Union has a limited capacity of LNG import terminals where the superchilled gas is regasified before it is sent along pipelines to its final destinations. Spain and France have the biggest import capacity in the EU, with the UK coming in second in Europe as a whole with 50 billion cubic meters in annual nameplate LNG import capacity. Germany, on the other hand, the biggest gas market in Europe, has zero LNG import terminals.
By Irina Slav for Oilprice.com