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Rabat – As European countries race to secure gas supplies ahead of winter, a 500% increase in freight rates for liquified natural gas (LNG) this year threatens to send Morocco’s energy bills soaring.
On Tuesday, LNG freight platform Spark Commodities reported that the cost to charter an LNG ship in the Atlantic Ocean reached a new high of $397,500/day, up from $374,000/day on Monday. Bloomberg says that the serious increase in freight rates is due to the lack of ships.
Additional forecasts from maritime consultancy Drewry predict that LNG freight rates might reach $1 million/day given that the industry expects a record-breaking quarter.
The rise in Morocco’s energy bills is also expected to widen the country’s trade deficit.
With Morocco importing 90% of its energy needs, the country is vulnerable to fluctuations in global prices of energy commodities. This was clearly reflected in the country’s energy bills earlier this year. By the end of April, the country’s expenditures on energy doubled to settle at MAD 43.7 billion ($3.9 billion).
Given that Morocco has only recently joined the global LNG market, the country has to explore ways to secure a sustainable supply to the domestic market while offsetting the rising freight costs.
Revenues from winter tourism and fertilizer exports can partially help in addressing the issue, yet it remains unclear whether gas prices are going to stabilize soon.
The recent quarterly gas market report from the International Energy Agency (IEA) indicated that Europe’s LNG imports are forecasted to increase by over 60 billion cubic meters this year, “more than double the amount of global LNG export capacity addition.”
This is expected to put additional pressure on the LNG trade in the short and medium-term.
Japan and Korea are preparing for possible supply disruptions as the two countries have initiated policies to reduce reliance on imported LNG for power generation, says the IEA.
Read Also: Minister: Morocco Is Negotiating Medium-Term LNG Contracts
With the LNG prices reaching new highs, the global exporters of the energy commodity are capitalizing on the situation.
The USA, a major player in the market, is expected to become the world’s largest LNG exporter in 2022 with a year-on-year export increase of 24 million tonnes, according to Shell LNG Outlook 2022.
In addition to the USA, Norway and Qatar plan to boost production amid shortages of natural gas in Europe due to the war in Ukraine.
Even Russia, which has been subjected to numerous sanctions over the past months due to its invasion of Ukraine, continues to benefit from the rise in the LNG market.
Russian LNG sales are set to reach a new high record in 2022, says Bloomberg’s energy columnist Javier Blas. Most Russian shipments are directed to European and Asian countries including the top three buyers, France, Spain, and Japan.
