Europe Needs More Long-Term LNG to Avoid Energy Shocks, MET Says
(Bloomberg) — Europe needs more long-term contracts for seaborne gas supply to hedge against soaring prices, said the head of Swiss energy company MET Group.
European gas prices have more than doubled this year as the war in the Middle East has effectively cut off about a fifth of the world’s liquefied natural gas flows. Asian buyers are increasingly snapping up flexible spot cargoes — setting the stage for even fiercer competition between the regions this winter.
“A lot of long-term LNG supply globally goes to Asia, while Europe is still more spot-driven, and you can question how smart that is,” Chief Executive Officer Huibert Vigeveno said in an interview. “Having more long-term contracts in Europe would certainly have helped this year.”
After losing most pipeline flows from Russia in 2022, Europe has increased its reliance on global LNG shipments, but utilities have been hesitant to commit to long-term contracts. Companies have focused on shorter and more flexible deals amid a projected decline in demand and stricter climate targets.
Europe has also slowed deals with the US, the world’s top LNG exporter, after relations between Washington and its European allies soured. While Brussels has warned against over-reliance on American fuel, Asian LNG buyers are accelerating discussions to buy more LNG from the US as the war in Iran drags on.
The European Union stands out among top global importers for its reliance on the spot LNG market, according to the EU Agency for the Cooperation of Energy Regulators. About 30% of the bloc’s LNG imports were spot-based in 2024 and the share remained high last year, according to the group known as ACER.
Prices have eased from this year’s peak earlier this month as traders closely follow renewed diplomatic efforts to stabilize energy flows from the Middle East. But uncertainty over supplies through the vital Strait of Hormuz remains.
“Even if Hormuz reopens, it will take at least three months for exports to ramp-up,” Vigeveno said, adding that prices risk rising again.
“Earlier this year, we had expected European gas around €50 a megawatt-hour in winter if the Strait of Hormuz were to reopen in May, at €70 if that was July,” he said. “Now we could probably go up to €100 if Hormuz doesn’t reopen by the end of the winter, and that’s just supply-demand fundamentals.”
Meanwhile, MET is expanding and looking at potential transactions in northwest Europe, Vigeveno said, without providing more details.
“We have strong positions in central, eastern and southern Europe, but we would be interested to increase participation either organically or inorganically in Germany and other countries in Northwest Europe, in gas, LNG, power, and renewables,” he said.
The US, where MET buys substantial volumes of LNG, is also a focus, and the company is considering opening an office there, he added.
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