The balance of power among the largest importers of liquefied natural gas in 2022 has completely changed – the European Union as a collective buyer has taken the first place with a huge gap, Japan is in the second place, and China has moved from the first place in 2021 to the third place.

EU

According to Gas Infrastructure Europe, the EU cumulatively used 98 million tons of LNG (127 billion cubic meters of gas after gasification) in 2022, again making it collectively the largest gas buyer in the world.

Europe imported 74.1 million tons of LNG in 2021, behind both China (79.2 million tons) and Japan (74.3 million tons).

The region has set a target to reduce dependence on Russian gas with LNG. Against the backdrop of the failure of the Nord Stream 1 pipeline, its fulfillment went much faster than the International Energy Agency’s boldest calculations had suggested.

New LNG receiving projects have been launched, which, unlike in previous years, were able to move very quickly from approval and design to practical implementation. They all utilize floating LNG receiving and regasification units. A terminal in the Netherlands (EemsEnergyTerminal) has already been launched, in Germany terminals in Wilhelmsfhaven and Lubmin are in operation, and a terminal in Brunsbüttel is about to be launched.

Despite the commissioning of new receiving facilities, they are far from operating at full capacity. The new LNG industry has hit a glass ceiling in the utilization of regasification capacity. In 2022, the average utilization rate of regasification capacity across the EU was 63%, and the same level will continue in 2023.

Japan

Japan cut its LNG imports by 3% to 71.997 million tons in 2022, the country’s Finance Ministry said Thursday.

The average price of LNG imports in 2022 almost doubled to $657 per thousand cubic meters after $384 in 2021. At the same time, the spot price in the region (JKM Platts index) in 2022 was at $1214 per thousand cubic meters.

Supplies from Russia in 2022 increased by 5% to 6.869 million tons, meeting 9.5% of the country’s needs. The U.S. cut supplies by 41% to 4.135 million tons.

Japan received 6.062 million tons of LNG in December 2022, 14% less than a year earlier.

In Russia, large-capacity LNG is produced by Sakhalin Energy (co-owners Gazprom, Mitsui and Mitsubishi) and Yamal LNG (participants NOVATEK, TotalEnergies, China’s CNPC and SRF). LNG is also produced by Gazprom’s medium-tonnage plant at the Portovaya compressor station and Cryogas-Vysotsk (a joint venture between NOVATEK and Gazprombank).

China

LNG deliveries to China in 2022 are expected to be around 63 million tons, which in any actual result of customs statistics for December is significantly inferior to the volume of Japanese purchases.

In the first 11 months of 2022, China imported 65.935 million tons of LNG, down 8% from January-November 2021. December could add up to 7 million tons more.

The main reason for the drop in energy imports in 2022 to 2021 is the imposition of strict restrictions to prevent the spread of coronavirus infection. The “zero-tolerance” policy for COVID-19 (limiting the spread of the virus through strict “lockdowns” and mandatory quarantine for those who came into contact with infected citizens) was part of the preparations for the Winter Olympics in February, but authorities continued the practice after the competition ended. Now Chinese authorities are gradually lifting the restrictions.

Chinese buyers, against the backdrop of anti-commodity restrictions at home and a frenzy of demand for LNG in Europe, skillfully maneuvered the spot market to achieve the optimal price for gas supplies. After Europe filled its storage facilities to capacity, Chinese buyers took advantage of the price drop and ramped up purchases at the end of the year.