Extreme weather in Northeast Asia and North America in the first quarter of 2021 -- and the resulting gas demand and price spikes -- were reminders that gas supply security "should not be taken for granted", the International Energy Agency.
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The cold weather -- first in Northeast Asia in January and then in the southern US in February -- was a "useful reminder" that winters can be cold and that gas demand is particularly temperature-sensitive, the IEA said in its latest quarterly gas market report on April 15.
"Time will tell whether the cold snaps of winter 2020/21 will have an influence on market design and regulatory policy decisions. But they do remind us that security of energy supply is never out of season," the agency said.
Speaking April 15 during a webinar to mark the launch of the report, IEA analyst Gergely Molnar said the price spikes -- which also occurred in Spain during an unusual cold snap this winter -- showed how markets could become stressed "very quickly".
"It is important to note that security of supply should not be taken for granted," Molnar said.
The S&P Global Platts JKM benchmark spot Asian LNG price hit an all-time high of $32.50/MMBtu in mid-January due to a combination of incremental gas demand in Northeast Asia, limited storage capacity and regional liquefaction outages.
The IEA said this also had repercussions on European markets, driving LNG away from Europe and prompting a surge in storage withdrawals and price spikes.
"These extreme events illustrate broader energy policy and security-related realities," the IEA said.
One of those is that gas markets are becoming truly global, with implications for interdependence, it said.
"This was illustrated by the LNG switch from Europe to Asia during the January cold spell, compensated by withdrawals from European underground storage sites."
Speaking during the webinar, Luca Franza, head of the energy program at the Italy-based Istituto Affari Internazionali, said the cold snap in Texas -- as well as the blockage of the Suez Canal in March -- showed the gas market was "still vulnerable to shocks" despite abundant supply.
The IEA said the winter energy crisis in Northeast Asia also revealed capacity constraints on the Panama Canal for the first time.
"The US provided almost all the incremental LNG supply to Northeast Asia during that cold spell," Molnar said. "This led to longer LNG shipping routes and congestion in the Panama Canal."
In its report, the IEA said the Panama Canal could present a bottleneck for global LNG trade, particularly for US cargoes dispatched to Asia.
"During the cold spells in Northeast Asia, unscheduled spot LNG cargoes faced wait times of up to 12 days to cross the Panama Canal, or had to take longer journeys via the Suez Canal or around the Cape of Good Hope in Africa to reach buyers in Northeast Asia, who offered a steep premium to attract additional LNG amid a growing fuel shortage," it said.
"The congestion on the Panama Canal contributed to the market tightness and record-high spot LNG prices in Asia, and exposed the inherent limitations of this vital LNG shipping route."