The International Energy Agency (IEA) has released the third annual edition of the International Energy Agency’s Global Gas Security Review, which provides an in-depth analysis of recent global natural gas security-related issues and lessons learned. The report summary, observed that China’s supply shortfall over the last winter, which triggered ripple effects around the world, highlighted the pivotal role of Liquefied Natural Gas (LNG) in enhancing global gas security and flexibility of supply. “Our third report contributes to a better understanding of gas security of supply by providing more transparency on LNG markets and their role in global gas system balancing,” said Dr.
Fatih Birol, the IEA’s executive director. In Europe, the response to a string of cold spell episodes and unplanned gas supply outages also showed the success of integration and emergency policy measures. The analysis finds that, while there have been real improvements in LNG flexibility that can contribute to easing supply shortages, uncertainties remain for the future evolution of gas markets.
This includes a risk of tightening from insufficient investment in production and infrastructure capacity, or questions surrounding future shipping capacity growth, a pre-condition for LNG market flexibility. These uncertainties could have an impact on price volatility and hurt consumers – especially the most price-sensitive emerging buyers – and cause additional security concerns. The report also addresses how LNG markets are reshaping shipping needs. The risk of a lack of timely investment in the LNG carrier fleet could pose a threat to market development and security of supply, which could materialise even earlier than the risk of insufficient liquefaction capacity.
To address these issues, supply flexibility remains a key prerequisite to ensure further global gas trade development and security. Yet the priorities in terms of flexibility differ for long-term traditional buyers who seek the removal of destination clauses, and new emerging buyers whose priority is more focused on procuring short-term supply, usually for prompt execution. LNG flexibility has evolved with the development of secondary markets, emphasizing the role of portfolio players. The report provides the most recent trends in LNG flexibility, based on a detailed assessment of contractual data. This analysis shows the impact of the growing role of emerging LNG buyers and of the development of market liquidity on trade and new contracts.
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