ICIS ANALYST VIEW: Spanish virus impact on LNG imports

LONDON (ICIS)–Spain is home to one third of Europe’s LNG import capacity, so a lockdown has the potential to further gum up the global LNG supply chain if, as seems likely, it leads to a drop in demand for gas and a reduced ability to support scheduled imports.

A total of 28 cargoes are expected to have been delivered into Spain by the end of March, up from 18 in the same month last year. This continues a longer-term trend of a surge in LNG volumes into Europe.

Initially, this was due simply to lower demand from Asia, but it has been exacerbated since the start of this year by the evolution of the coronavirus hitting demand in China.

In its most recent briefing on 11 March, Spanish grid operator Enagas, which manages the country’s six LNG terminals said it was prepared for disruption but the escalation of measures likely to reduce gas consumption in the country may threaten those plans.

At the time of writing, there appeared to be capacity to house the LNG currently scheduled to be delivered into the country’s six terminals. However, the experience of a mild final quarter of 2019 in which the operator had to step in to open up underground storage facilities to free up terminal capacity will likely give importers some nerves.

Add in a potentially freakish drop in demand for electricity and for gas from industry and those painful fresh memories for LNG importers could soon be repeated.