IEA: Global LNG trade value surged to all-time high in 2022

Despite rising by a mere 5.5% in volumetric terms, the value of global LNG trade doubled in 2022 to an all-time high of $450 billion, the International Energy Agency (IEA) said in its first-quarter 2023 Gas Market Report.

“The global energy and gas crisis triggered by Russia’s invasion of Ukraine drove up spot gas prices and LNG import bills to record levels across key Asian and European markets. Gas and LNG producers’ record profits could support additional investment in reducing the emissions intensity of gas value chains, enhancing methane capture efforts and diversifying economic structures to adapt to the new global energy economy that is emerging,” IEA said.

LNG has played a key role in mitigating the impact of Russia's sharp cuts to pipeline gas supplies to the European Union (EU) and played a major role in avoiding a shortage of gas supply in 2022. Intense competition for flexible LNG cargoes between Asia and Europe provided strong upward pressure on hub and LNG spot prices throughout the year.

In Europe, month-ahead prices on the TTF averaged over $40/MMbtu in 2022, almost eight times their 5-year average between 2016 and 2020. In Asia LNG spot prices followed suit, averaging at $34/MMbtu over the year, more than five times their 5-year average between 2016 and 2020.

“Consequently, the estimated value of LNG traded under spot mechanisms – more than doubled to over $230 billion. Heightened geopolitical uncertainty and tightening supply drove up oil prices to their highest level since 2013. This in turn placed upward pressure on oil-indexed LNG contract prices, which rose by 70% in 2022 to an estimated average of $15/MMbtu. Hence, the value of LNG traded under long-term oil-indexed LNG contracts – about 60% of global LNG trade – rose by 90% to an estimated $220 billion,” IEA said.

Markets with greater exposure to spot procurement experienced a sharper increase in their LNG import prices. The weighted average import price in Japan and Korea, which rely predominantly on long-term, oil-indexed contracts, rose by 80% to $19/MMbtu in 2022. In contrast, the import price of the UK, heavily reliant on spot procurement, almost tripled compared with 2021 to an average of $28/MMbtu.

Europe’s LNG procurement costs more than tripled compared with 2021 to an estimated $190 billion, accounting for 60% of the total increase in the global LNG import bill. The region’s LNG imports soared by over 60%, while the estimated LNG import price more than doubled. The combined LNG import bill of Japan and Korea rose by 80% to nearly $115 billion, while LNG imports fell 2% compared with 2021. China’s LNG procurement costs rose by almost 20% to over $50 billion, despite a 20% drop in the country’s total LNG imports.