Express LNG regasification in Europe
Published by Jessica Casey,
Editor
LNG Industry,
In line with the growing importance of LNG in the energy mix of countries worldwide, the market for LNG continues to experience increased demand, forcing it to become more dynamic and diverse. With the addition of supply disruptions due to the war in Ukraine, it has become apparent that resilient value chains and flexible responses are important to secure supply. Access to import terminals and liquid gas markets creates more resilience to disruptions and is one of the key objectives in the EU’s strategy going forward.
LNG demand
Natural gas accounts for approximately 25% of Europe’s total energy consumption. The distribution of gas is allocated for power generation (approximately 26%), industry (23%), and the remaining capacity is allocated for heating, residential, and the service sector. According to the International Monetary Fund, with industry being largely dependent on a reliable and continuous supply of natural gas, some EU member countries could potentially face a weakening in their economic activity if Russian gas imports come to an immediate halt. The countries that would suffer the greatest consequences are Hungary, Czech Republic, Slovakia, and Italy, with a worst-case scenario assuming a decrease in GDP output of between 5 – 6%. Even countries that are not dependent on Russian gas supply, such as the UK, Ireland, Portugal, Belgium, and Croatia, could potentially suffer a 0.8% GDP drop.
European gas demand is currently estimated to be approximately 400 billion m3, which is assumed to stay relatively stable over the coming years. Seasonal dips in demand over the Summer is currently being offset by the mandate to refill the storages for energy security in the coming Winter. According to the European Commission, the overall gas import capacity in Europe is covering 40% (157 billion m3) of its current demand for gas, and the biggest importing countries are Spain (21.3 billion m3), France (18.3 billion m3), Italy (9.3 billion m3), the Netherlands (8.7 billion m3), and Belgium (6.5 billion m3). This creates a gap between capacity and demand which will be crucial to diminish in the following years by either increasing import capacity or reducing demand.
For the latter, the EU has agreed to reduce its consumption by 15% compared to the past five years’ average.
To enhance energy security on the continent, the European Commission created the policy initiative of Projects of Common Interest (PCI) for key cross-border infrastructure projects that link the energy systems of EU countries. The objective is to help the EU achieve its energy policy and climate goals which include affordable, secure, and sustainable energy for all citizens, and the long-term decarbonisation of the economy in accordance with the Paris Agreement. Based on the list of the EU’s PCIs, the LNG strategy includes a list of key infrastructure projects which are essential to ensure that all EU countries can benefit from a stable supply of LNG.
LNG supply
Only 10% of the total European gas needs are today met with domestic production, which has been decreasing over the recent years due to production limits in the Groningen Field in the Netherlands and decline in the mature fields in the North Sea. In 2021, approximately 20% of European gas needs were imported as LNG, of which the top three suppliers were the US (26%), Qatar (24%), and Russia (20%). In 1H22, the US became the world’s largest LNG supplier, with 71% of its exports going to the EU and the UK.
Export increase from the US is a result of the increased demand on the European continent, and the current sizeable difference in prices between the US and the European trading hubs – making the EU a lucrative market. Higher gas prices thus give the producers incentives to increase their spot volumes to cover the excess demand in the market. Furthermore, the global liquefaction capacity is set to increase dramatically in the coming years as new plants will be finalised in both the US and Australia.
Written by Magnus Eikens, ECONNECT Energy.
This article was originally published in the December 2022 issue of LNG Industry. To read the full article, sign in or register for a free trial.
Read the article online at: https://www.lngindustry.com/special-reports/27122022/express-lng-regasification-in-europe/
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