MNI INTERVIEW:TTF Over EUR100 In Prolonged Scenario-Gas Expert

European gas prices are likely to surge back above EUR100/MWh if disruption through the Strait of Hormuz proves prolonged, while competition for cargoes could become particularly intense in Asia, a gas expert at Columbia University’s Center on Global Energy Policy told MNI.

“In a prolonged disruption scenario, TTF prices will surge. This morning, TTF prices are at EUR60/MWh, this is just the beginning,” Anne-Sophie Corbeau said in an interview.

“In 2022, prices were higher than EUR100/MWh for most of the year. We will be looking at those prices,” she added.

“The first and most important question is the duration of the crisis: how long will the transit through the Strait of Hormuz be interrupted – days, weeks, months – and will we see damage to LNG infrastructure?”

ONE-FIFTH OF GLOBAL LNG AT RISK

Around 110 bcm per year of LNG transit the Strait of Hormuz, primarily from Qatar but also from the UAE, representing roughly one-fifth of global LNG trade in annual terms.

There is no clear replacement, Corbeau said.

Additional volumes from new liquefaction projects – including Plaquemines and Corpus Christi Stage 3 in the United States and LNG Canada – are coming online. But these facilities were only projected to add around 40 bcm of supply in 2026, she said.

“We will have all LNG-importing regions scrambling to get access to fewer LNG cargoes,” she said. “It’s a physical problem – we don’t have enough supply and there is none available.”

In that environment, adjustment would have to come from the demand side, through fuel switching – most likely towards coal rather than oil – and outright demand destruction.

EUROPE STILL PAYING A PREMIUM

Corbeau cautioned against describing the pre-crisis European gas market as “calm”. Even before the latest escalation, TTF prices were around EUR30/MWh – roughly 50% above the EUR20/MWh levels prevailing before the Ukraine gas crisis.

“I would not say that things have been calm for European countries,” she said, pointing out that Europe continues to pay structurally higher gas prices than many competitors. (See MNI SOURCES: ECB's Ukraine Lesson Lowers Oil Shock Tolerance)

ASIA TO COMPETE

Prolonged disruption would trigger intense competition for cargoes, particularly among LNG-dependent Asian economies.

“I do expect those whose gas consumption is entirely covered by LNG to fight the most – Taiwan, Korea and Japan,” Corbeau said.

China is heavily exposed, with almost 30 bcm of LNG imports. However, Corbeau is less concerned about China’s position relative to others.

China produces around 260 bcm of gas domestically – roughly 60% of its demand – and output has been rising steadily. Gas demand is also highly sensitive to government policy, prices and economic conditions, she noted. (See MNI INTERVIEW: Chinese Oil Reserves Enough For Short Iran War)

“If the government decides to reduce the switching from coal to gas and the growth in LNG trucks, that can reduce demand,” she said, adding that higher spot prices and weaker activity would also dampen consumption.

Coal remains the dominant fuel in China’s power mix, giving policymakers room to reduce gas burn if necessary. One uncertainty remains, however: the level of gas currently held in Chinese storage.

By contrast, lower-income LNG importers such as Pakistan may struggle to compete for expensive spot cargoes in a tight market.

Corbeau is the author of many publications focusing on gas and LNG markets, including the book “LNG markets in transition: the great reconfiguration.” The Center on Global Energy Policy is part of Columbia’s School of International and Public Affairs.