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. Last Updated: 07/27/2016

Total Official: Europe Could Up LNG Purchases to Bypass Russia, Algeria

KUALA LUMPUR — Europe may boost purchases of liquefied natural gas as it seeks to reduce dependence on supplies of the fuel piped from Russia and Algeria, an official from Total said on Tuesday.

Europe reduced supplies of piped gas by about 10 percent to 313 billion cubic meters last year, with Russian supplies down by 15 percent, said Laurent Chevalier, president of gas and power ventures in China. That compares with a 23 percent increase in LNG purchases to 68 bcm, he said.

“Europe is making massive investments in LNG terminals,” Chevalier said at  a conference. “There’s an enormous effort to ensure security of supply, and at the same time Europeans are also enablers for Russian pipelines.”

Demand for natural gas in Europe, which declined by about 5 percent last year to 540 bcm, may rise to 676 billion by 2020, according to his presentation. Europe is adding about 65 billion in LNG import capacity with more than 150 billion of new capacity in the planning stages, he said.

Imports of LNG by the United Kingdom rose more than ninefold as it built new LNG receiving terminals, Chevalier said. Demand for natural gas in the U.K. fell by 7 bcm last year because of the global recession and domestic production fell 10 bcm as North Sea output drops, he said.

Net LNG imports by the U.K. rose by 3 bcm last year after shipments rose 9 billion and pipeline supplies shrank 6 bcm, according to his presentation.

LNG imports increased because of cheaper prices, he said. Spot LNG, indexed to domestic gas benchmarks, is cheaper compared with Russian supplies, which are linked to oil prices.

“There’s a current disconnect between spot and long-term gas prices in Europe,” Chevalier said.

Crude oil futures in New York have more than doubled to $72 a barrel from about $33 in December while LNG prices have stagnated at $7 per million British thermal units, according to buyers and official data.

Europe’s economic recovery is uncertain, he said. The United States may not need “significant” LNG imports because of domestic gas discoveries from unconventional sources.