In coming years, Europe will have to compete for LNG with consumers in China, India, Pakistan and Bangladesh. In addition, new markets are yet to open as some Asian nations are just starting to use gas in power generation instead of more polluting coal and fuel oil. By contrast, Europes tightening climate targets will lead to more renewables squeezing out gas.
You can compare it to the coal market, Sommer said. Asia was always an anchor for European coal prices. The situation is moving into the very same phenomenon in the gas market as well.
LNG production is rising primarily in nations relatively close to Europe, such as the U.S. and Russia. But the addition of new plants in regions closer to Asian buyers has now slowed, a factor seen boosting the interconnectedness of gas markets worldwide.
The susceptibility of U.K. and European gas markets to global LNG prices may be set to increase, according to energy consultant Cornwall Insight.
With no concrete plans for new long-term storage facilities in the U.K. and declining U.K. Continental Shelf, it could point to a greater LNG dependency in the coming years.
This past winters LNG price volatility may be a taste of things to come. The super-chilled fuel is becoming such a global commodity as trade mechanisms evolve, that its now dictating natural gas prices, according to Christoph Merkel, managing director of the Merkel Energy consultancy in Germany.