Norway supplies nearly one-third of the European Union’s gas needs and 14% of its crude oil consumption, according to data from last year, reinforcing its importance to Europe as the continent’s gas reserves fall to their lowest level in 15 years and Asian competition for liquefied natural gas cargoes intensifies ahead of winter.
High prices and competition for cargoes
Competition for liquefied natural gas cargoes threatens to push prices above current levels, as Europe seeks to secure its needs while buyers in Asia show a willingness to pay higher prices for scarce cargoes. The pressure emerged after the wars in Iran and Ukraine changed Europe’s energy plans, which had aimed to reduce reliance on conventional sources.
Liquefied natural gas prices reached their highest levels in several years after the outbreak of the American-Israeli-Iranian war. The Platts JKM benchmark for Asian markets approached 30 dollars per million British thermal units in mid-September this year, before trading at 25.29 dollars last Friday.
By contrast, the price of fuel cargoes bound for Europe reached 24.62 dollars per million British thermal units, according to data from Spark Commodities.
The willingness of Asian buyers, who were usually described as price-sensitive, to pay more rather than risk supply shortages represents a “fundamental shift in the gas market.”
Ueda said: “It seems India and Pakistan have now become accustomed to price volatility,” adding that “they still have a strong appetite to buy.”
Martin Rats, an analyst at US bank Morgan Stanley, said: “We have seen both Pakistan and Bangladesh buy multiple liquefied natural gas cargoes at 25 dollars per million British thermal units, something we have not seen since 2022.”
Limited options for reducing demand
Developing countries in Asia have cut their oil and gas consumption to the lowest possible level since the outbreak of the Iran war, leaving them with limited scope for further demand reductions. Advanced Asian economies such as Japan and South Korea have also increased their reliance on coal for power generation, while their ability to switch to sources other than oil and gas has become limited, suggesting that strong Asian demand for liquefied natural gas will persist in the coming months.
In Europe, European Union countries have largely maintained the measures they adopted after the war between Russia and Ukraine began in 2022 to curb natural gas consumption and shift to other alternatives, making it difficult to reduce demand from its current level. Anders Borsberg-Smith, a researcher at the Boston Consulting Group, described competition between Europe and Asia for available cargoes as “inevitable.”
Some Asian countries have moved to secure long-term liquefied natural gas supplies to reduce their need to compete for spot-market cargoes in the future. Some European buyers, by contrast, have hesitated to sign long-term agreements for fear that they could conflict with new European Union regulations requiring importers to cut methane emissions, amid pressure to delay implementation of the rules, including pressure from French President Emmanuel Macron.
Alexandros Exarchou, chairman of Greece’s Aktor Group, which recently signed a long-term agreement with US company Venture Global to buy liquefied natural gas, predicted that the European Union would backtrack on methane-related regulations amid the race to secure supplies for winter and inflationary pressure resulting from the sharp rise in energy prices.
Norway strengthens its role in supplying Europe
The European Union is increasingly relying on US gas to meet its needs, alongside negotiations between Europe and the administration of US President Donald Trump over tariffs and trade. At the same time, climate change has fallen down the European priority list, while renewable energy sources are also being presented as a means of protecting consumers from sharp increases in fossil fuel prices.
As Europe’s demand for gas rises and it seeks to reduce reliance on US supplies, Norway is emerging as a key supplier despite being outside the European Union. Around one-quarter of Norwegian gas production passes through the Kårstø facility, much of it shipped to Europe through pipelines reaching Belgium, France and Germany.
Equinor, which operates the Kårstø facility and is Norway’s largest oil and gas producer, has changed its policy as Europe turns back toward conventional energy. Six years ago, the company announced plans to invest in renewable energy and reduce carbon emissions to net zero by mid-century, but this year it abandoned its renewable-energy target to focus on extracting gas and oil from the Norwegian continental shelf as demand rises.
Anders Opedal, Equinor’s chief executive, said after signing a 15-year gas supply contract with German utility Uniper that all of the company’s European customers have a transition strategy, adding: “They are investing in renewable energy sources, but they are also signing long-term gas contracts.”
Norwegian Energy Minister Terje Aasland said his country’s strategy was to remain a long-term oil and gas supplier to the European market, adding: “Our goal is not defined by specific figures, but by achieving the highest possible level of production.”
