European energy supply has been under scrutiny since February 2022 when Russia invaded Ukraine. Traditionally a big importer of Russian gas, Europe has had to look elsewhere to fulfil its projected energy needs. Fortunately, LNG was waiting in the wings, ready to change Europe’s energy landscape.
Whereas in 2021, LNG accounted for only 19% of European Union (EU) energy imports, in 2023 it accounted for 41%, revealed Kpler data as reported by the Institute for Energy Economics and Financial Analysis (IEEFA). This uptick was spurred in part by an EU campaign announced in May 2022, known as the REPowerEU Plan, to help the region diversity energy supply chains, save energy and drive renewable energy creation.
According to an IEEFA report, six new LNG terminals have been introduced since the beginning of 2022, along with one expansion. Projected figures reveal that there may be more capacity than required, with Europe’s annual import capacity projected to reach 406 bcm by 2030, while gas demand is expected to fall to around 400 bcm over the same period.
Meanwhile, demand for regasification and floating storage units (FRSUs) has increased, with Europe having secured up to 12 vessels in 2022, reported S&P Global in December 2023. Often converted from LNG vessels, these units can be commis- sioned more cheaply and quickly than land-based infrastructure and offer a responsive solution to shoring up supply chain security.
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Germany has been especially active commissioning three units since 2022, in addition to an existing three. The Independent Commodities Intelligent Services reveals Estonia, Finland, France and the Netherlands have FRSU plans in the pipeline. Meanwhile, Greece recently received an FRSU in Alexandroupoli that will feed into the broader Vertical Corridor initiative – an LNG supply chain linking Greece, as the importing nation with Bulgaria, Romania, Hungary, Slovakia, Moldova and Ukraine. Cyprus is awaiting delivery of a partly EU-funded LNG-to-FRSU conversion project which will supply natural gas to Cyprus’ Vasilikos Power Plant. The LR-classed unit will reduce the cost of elec- tricity and carbon emissions, improve air quality and provide energy security to the island for the next more than two decades. These activities combined have readied the EU for a future where LNG plays a significant role in the region’s supply chains for the next two decades.
Meanwhile, announcements from Joe Biden’s administration in January 2024 to indefinitely pause additional LNG export capacity does not cause great concern, as its impact could only be felt towards the end of this decade. It is noted that the US was the largest exporter in 2023 and is a key exporter to Europeancountries, significantly to France, the UK and Spain. In any case however, salient suppliers in the Middle East will continue to deliver and will likely meet any shortfalls if ever required.
LNG will continue to be a major component of Europe’s energy landscape as it diversifies its infrastructure and increasingly moves to low- or zero-emissions landscape.
