Asia’s energy crunch turns from bad to worse after fire at US plant

Asian liquefied natural gas buyers are ratcheting up competition with Europe to secure spare supply as a series of outages threatens a shortage this winter.

A new timeline presented on Tuesday to restart a key US liquefied natural gas export plant was much longer than traders had anticipated, while lower deliveries from Indonesia to Russia tightened global supply. Asian LNG futures for winter delivery surged to the highest level in over two months.

Global gas supplies were already slated to be tight this winter, when demand for the heating fuel peaks, but the new disruptions have set the stage for a fight between Asia and Europe over a dwindling amount of supply. Spot prices in the two regions are trading at a seasonal high due to a global supply crunch exacerbated by Russia’s invasion of Ukraine, and rates could rally to new heights if buyers become entangled in bidding wars.

While the Freeport outage is expected to have a larger impact on Europe this summer, where most supply was slated to be delivered, the prolonged disruption is likely to leave some Asian customers short this winter. Already, Asian LNG traders based in Singapore are calling suppliers to check available shipments through the rest of the year.

And even tighter supplies could make it harder for Japan – the world’s second-largest LNG importer – to secure prompt cargoes from the spot market for the summer, as the country is already facing a power supply crunch.

The extended disruption is seen removing dozens of LNG cargoes from the market, which will require replacing, traders said. Importers in Asia and Europe will try to find alternative supply from other US projects, as well as from exporters including Nigeria, Qatar, Angola and the UAE. Still, there is little available supply through the next few months.