Will we fight gas with Japan and South Korea in the winter?

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The increased demand for liquefied natural gas (LNG) by European countries to cope with the reduction in the use of Russian gas could be a problem for Japan and South Korea, currently second and third countries for imports of this fuel. world. As winter approaches, both Europe and East Asia are starting to take care of gas reserves to be accumulated for the colder months of the year, and Asian countries risk receiving less than they would like due to European demand. it has grown a lot and so have gas prices: for those who sell it there are wider profit margins in Europe at the moment.

Natural gas prices in Europe have already increased fivefold compared to a year ago: the energy crisis it had begun as a result of the coronavirus pandemic and was exacerbated by the Russian invasion of Ukraine. Russia, which was previously the main gas exporter to Europe, in recent months has repeatedly reduced supplies passing through the pipelines and is expected to continue to do so. For this the European countries, including Italyhave organized themselves to buy and use a greater quantity of LNG, the gas that is made liquid to occupy a much smaller volume and therefore be able to be transported by ship.

The price of gas has also risen in Asia, but not as much as in Europe. As he explains an article from Financial Timesat some moments, companies that sell LNG might be better off terminating a long-term contract with an Asian country to turn to a European country: they would make more profits even by paying a high penalty, because the price differences are very large.

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In order to compete, Asian countries may find themselves overpaying for gas. Japan and South Korea have the means to do this if the need arises, while for less wealthy countries this could be a major problem. The cost of coal has also risen, a more polluting source of energy that some European countries are using more to cope with the Russian gas crisis, and as a result countries like Bangladesh and Pakistan have faced frequent blackouts.

For the moment, a struggle to grab LNG supplies has not yet begun, but this is expected in the sector, especially if next winter will be particularly cold. In the meantime, however, both Japan and South Korea are moving ahead: the energy companies of the two countries are trying to obtain long-term contracts for the coming months and the beginning of 2023.

One of the countries that exports the most LNG is the United States. Both in 2020 and in 2021 they had sent their liquefied gas mainly to Asia, and only 34 percent to Europe, according to data from the Energy Information Administration, the statistical agency of the US Department of Energy: in the first four months of 2022, on the other hand, exported 74 percent to Europe.

In this context, the fact that China, the world’s largest LNG importer, is using less gas and less coal due to the economic slowdown due to coronavirus lockdowns favors other countries. Chinese LNG consumption has decreased and the country is reselling some of what it does not need; moreover, unlike the European countries, it will have no problems in continuing to use Russian gas, whose supplies have increased through a new pipeline.

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