LNG importation and distribution issues
This is part 2 of an update to the LNG export and import situation for the EU. Part 1 discussed the limitations on expanding US capacity to make up for foreign import bans.
At the EU end, a record level of 16B cuM was seen in January 2022. Total EU imports from Russia of 155B cuM/year of total demand of 400B cuM/year. Only 10% of total EU imports are LNG. Capacity usage analysis shows that existing EU LNG import re-gasification facilities are almost max’d out. Some terminals, like those in Spain, have capacity with no outlet to supply the natural gas to rest of the EU. To replace Russian pipeline supplied gas will take operation of new facilities not yet complete.
The first LNG terminal in Germany was not approved as of February 2022. The development company was started in 2018 and paperwork submitted in 2021. The German state government indicated that a permit would not be granted before autumn 2023. The schedule would have placed initial terminal opening at 8B cuM/year capacity in 2026. The Russian imports of natural gas totaled 46B cuM/2021. This priority and schedules were radically altered by the parties with the onset of the Ukrainian conflict. Various German enterprises will use 10-year leased floating facilities totaling 22.5B cuM/year capacity (25.5% of total gas of 142B cuM/year German gas demand). The earliest these partial capacity facilities will become operational is Winter 2022/2023. Substantial delays are likely due to regulatory, environmental litigation, and completion of infrastructure connections. The full regasification terminals to be built are still unlikely to be completed prior to 2026.
Italy is also now committed to 2 floating regasification plants totaling slightly more than 10B cuM/year taking 12-18 months to deliver and startup. The goal is to replace 30B cuM/year of Russian natural gas (out of 75B cuM/year total imports). Three existing LNG facilities process 20% of all imports (15B cuM/year). Plans for two additional onshore terminals (for up to 20B cuM/year), permitted and not yet started, will take 3-4 years to complete.
A possible limitation is that there are only about 3 dozen floating plants in existence. The construction time is 2.5-3 years. Conversions of existing LNG tankers is possible though these are already over subscribed in the current market with the new demands.
The EU will push for replacement of Russian energy exports. Similar to export political and economic pressures in the USA EU pressures are likely exposing long standing geopolitical risks. New LNG import deals, energy conservation, and additional facilities will help. Existing energy-intensive facilities (or dependent like fertilizer) are likely to see reduced capacity and production.
If you’d like to read part one – “Pump Fake” you can find it at https://www.ekalore.com/post/pump-fake-us-lng-expansion
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