CNA Explains: How the Russia-Ukraine war drove up LNG prices and what this means for Singapore

6 days ago 30

SINGAPORE: Global energy markets have been impacted by Russian President Vladimir Putin's announcement of a military mobilisation, sending prices higher and threatening to tighten fuel supplies even further.

The war in Ukraine has already made goods and commodities more expensive around the world, with everything from fuel to food and even paper affected.

And as winter approaches with Russian gas supplies restricted for "unfriendly" countries, a scramble is under way in Europe to secure more liquefied natural gas (LNG).

The impact of this increased demand is evident in the price of LNG exports from the United States, which has increased by close to 70 per cent since the start of the year, according to the US Energy Information Administration.

What are the knock-on effects on Singapore and other countries in the region? CNA spoke to energy analysts to find out.

What is LNG and why is it growing in importance?

LNG is natural gas that is stored and transported in liquid form at atmospheric pressure and at a temperature of -162 degrees Celsius, according to Singapore's Energy Market Authority (EMA).

Liquefying natural gas reduces its volume by 600 times, making it easier to store and transport. LNG is transported in purpose-built tanks by double-hulled ships and must be re-gasified for use once it reaches its destination.

This is in contrast to natural gas delivered by pipes, which Europe has been heavily reliant on.

"Europe has been quite reliant on Russian pipe gas up to (the first half) of this year," said Mr Alex Siow, lead Asia gas analyst at Independent Commodity Intelligence Services (ICIS).

"When this source of gas was halted – or severely reduced – Europe had no choice but to rely on LNG to replace Russia's pipe gas."

Domestic production and pipe imports from other countries such as Norway, Algeria and Azerbaijan could not be increased to levels that would make up for the lost Russian gas, he added.

Why are prices rising?

This new-found need for LNG has sent prices on ...

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