Europe’s race for new LNG import infrastructure is accelerating

The rush for countries across Europe to install new LNG import facilities in record time continues to gather pace, with FSRUs now secured for deployment in a number of EU member states.

The sharp drop in Russian gas pipeline imports – and the prospect of further reductions or a complete halt in flows from Russia – has led to many projects, old and new, being considered as soon as possible.

Most plans are for floating LNG import facilities – called FSRUs (Floating Storage and Regasification Units) – which can be installed faster than permanent onshore import terminals.

Some 25 new FSRUs are expected to be installed in the EU in the coming years, according to data from S&P Global Commodity Insights, with the first installations already expected to be operational before the end of 2022.

More details on the planned terminals are available in the Gas and Fuels chapter of the Energy Transition Atlas, published by S&P Global.

Click here to view a new section of the Energy Transition Atlas, where you can explore existing and planned LNG import facilities as Europe races to secure floating LNG storage.

Projects are moving at unprecedented speed, driven by the urgent need to relocate the Russian gas pipeline, with developers praising the combination of political and commercial will in accelerating work.

German grid operator Open Grid Europe this month started work four weeks ahead of schedule on a new pipeline to connect the site of a planned FSRU in Wilhelmshaven to the German grid.

“It is only through close cooperation between politicians, authorities and businesses that we have been able to reach this milestone,” said Thomas Huwener of OGE.

Germany is arguably the EU member state most affected by Russian gas cuts and as a result is launching with five new FSRUs as well as two permanent LNG import sites ashore.

There are also plans for five FSRUs in Greece – which aims to become a gas hub for supply to the wider southeastern European region – as well as two in the Netherlands, two in Italy (more two others for the island of Sardinia), and two in Ireland.

Single FSRUs are also planned in a number of other EU countries, including France, Finland, Estonia, Cyprus and Poland.

Price Dislocations

Platts Analytics LNG analyst Luke Cottell said Russia’s invasion of Ukraine had rapidly reshaped commodity markets, with European gas and LNG at the epicenter.

Cottell said the majority of the burden of replacing Russian gas falls on LNG, although regasification and interconnection capacity create bottlenecks and lead to significant intra-regional hub price dislocations.

“As we move forward into 2023, the deployment of new FSRUs should help smooth out large dislocations between hubs in Europe as bottlenecks are alleviated,” Cottell said.

But that, he said, would not necessarily mean prices would fall, much depending on Europe’s ability to secure LNG cargoes.

“While the capacity constraints limiting Europe’s ability to offset the Russian pipeline with LNG will be eased somewhat, the focus will instead be on the availability of spot LNG in the global market and the price that needs to be paid to outperform consumers in Asia,” he said. .

Gas prices in Europe remain at elevated levels after the Dutch one-month TTF price hit a record high of 212.15 euros/MWh on March 8, according to Platts price assessments from S&P Global.

The contract was last priced at 193.30 euros/MWh on August 9, amid continued concerns over Russian gas supplies to Europe ahead of next winter.

Germany in particular has accelerated its efforts to offset falling Russian imports, as LNG development has been boosted in recent months by a number of new regulatory initiatives.

In May, the German parliament approved a new law aimed at speeding up the approval process for new LNG import terminals and the German regulator announced in June that it planned to reduce feed-in tariffs for terminals by 40%. LNG.
Germany has also decided on the locations for the four FSRUs it has chartered, with two ships to be deployed to Wilhelmshaven and Brunsbuttel by the end of the year.
The other two FSRUs will be available from May 2023 and will be located in Stade and Lubmin.

In addition to the four state-backed FSRU projects, a fifth project was announced on July 13 by private company Deutsche ReGas which will see France’s TotalEnergies supply an FSRU for deployment in Lubmin as early as December.

In the Netherlands, the operator Gasunie plans to deploy two FSRUs – the Exmar S188 and the Golar Igloo – from September.

“From the end of this calendar year, the LNG import capacity of the Netherlands will double and we will be the largest contributor to the increase in LNG import capacity in Europe”, said the CEO of Gasunie , Han Fennema, in July.

EU efforts

The European Commission also sees increased LNG imports as key to reducing dependence on Russian gas, saying in its new energy strategy published in March that it could procure an additional 50 billion m3 of LNG within a year. .

The US has pledged to supply an additional 15 bcm of LNG to the EU in 2022, with the EC saying it will seek to secure longer-term US LNG demand of around 50 bcm/year until 2030.

Europe currently has an import capacity of around 160 million tonnes/year (220 bcm/year), but according to industry group Gas Infrastructure Europe (GIE), EU LNG terminals could provide a gateway for over 285 bcm of imports by 2030, enough to meet estimated import demand at that time.

However, the challenge remains how to secure LNG volumes, with GIE Deputy Secretary General Roxana Caliminte saying in April that the EU should consider long-term contracts to ensure LNG reaches Europe in quantities. sufficient.

Caliminte cited the example of Qatar, where the majority of its LNG is sold to Asia under long-term contracts.

“So it’s important to have an open mind [European] Commission and allow Member States to [use] such mechanisms as well. There’s no getting around it,” she said.
Source: Platts

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