Europe faces risk of costly winter due to lack of long-term LNG contracts

Europe has so far made insufficient progress in securing long-term contracts for deliveries of liquefied natural gas (LNG). According to an analysis published jointly by news outlets Reuters and Euractiv, this could negatively affect security of supply during the next winter season. A recovery in natural gas demand in China is expected, which could create tension in the market.

Last winter, Europe bought LNG mainly on the spot market

LNG deliveries during the 2022/2023 winter season made a significant contribution to offsetting lower supplies of natural gas from Russia. In 2022, Europe imported 121 million tonnes of LNG, a 60% increase compared with 2021. However, much of this gas was purchased on the spot market.

Based on analysts’ estimates, Europe accounted for roughly one-third of global spot LNG market transactions last year. In 2021, the figure was around 13%. If long-term contracts are not signed, analysts say this share could rise to as much as 50%. Given the EU’s climate and energy goals, traders are cautious about signing long-term supply contracts.