Europe heading for huge excess LNG import capacity, experts warn

New analysis shows terminal capacity will far exceed demand for liquefied natural gas by 2030.

By Charlie Cooper  March 21, 2023

European countries risk wasting huge sums of money on gas import infrastructure they won't need after “panicking” in response to Russia’s pipeline shutoffs, expert analysts warned.

In a rush to find alternative sources of gas after Russia’s Gazprom began limiting Europe’s vital pipeline imports, many European countries — and Germany in particular — fast-tracked plans for new liquefied natural gas (LNG) infrastructure to bring in supplies by sea from the United States, Qatar and elsewhere.

But according to a new analysis by the Institute for Energy Economics and Financial Analysis (IEEFA), shared with POLITICO, European countries may have hugely overshot the mark, with current planned import capacity far exceeding likely LNG demand by 2030.

If current infrastructure plans are carried out, LNG terminal capacity across Europe — including in the U.K., Norway and Turkey, which are closely connected to the EU’s gas market — could exceed 400 billion cubic meters (bcm), the analysis shows.

But with EU-wide gas demand already falling and renewable sources of electricity projected to make up a larger and larger share of Europe’s energy mix, actual LNG demand in 2030 could be as low as 150 bcm, IEEFA predicts.

That would leave a gap of 250 bcm of unused LNG import capacity, equivalent to more than half of Europe’s overall gas demand, which stood at 413 bcm in 2021.

Such a situation could see terminals across Europe sitting idle and becoming “stranded assets,” warned Ana Maria Jaller-Makarewicz, energy analyst at IEEFA and author of the new analysis.  

“This is the world’s most expensive and unnecessary insurance policy,” she said, adding that Europe should consider dropping some planned projects.

Germany, which had zero LNG import capacity before 2022, is among the countries that has most dramatically invested in new infrastructure, with plans to spend at least €9.8 billion over the next 15 years. According to IEEFA’s analysis, the country could have 9 bcm of excess capacity by 2030.

A spokesperson for Germany's ministry of economics and climate action said the country's plans are "strengthening precautionary measures and safeguarding the security of energy supply" for Germany and for Europe more widely.

But countries with pre-existing LNG infrastructure are on track to have the greatest excess capacity, with Spain forecast to have a mismatch of 50 bcm. In Turkey, that figure is 44 bcm; in the U.K., it's 40 bcm; in France, 14 bcm; and in Italy, 10 bcm.

LNG imports into Europe increased by 60 percent in 2022 compared to 2021, including a more than twofold increase in U.S. imports, a 23 percent increase in imports from Qatar and a 12 percent increase in LNG imports from Russia.

IEEFA said LNG demand will continue to rise in 2023, but will start to fall back again as soon as next year, mainly due to gas demand cuts in the EU, renewables taking a greater share of the energy burden and governments increasingly focusing on energy efficiency measures.  

Europe’s glut of LNG infrastructure plans has already drawn criticism from climate campaigners amid fears it could push importers to continue using natural gas in order to justify the expense of the new infrastructure.

Some LNG infrastructure is expected to be converted for importing clean hydrogen gas in the future. But the IEEFA's Jaller-Makarewicz cautioned that future demand for hydrogen is still uncertain and that there are technical challenges involved in converting the infrastructure for hydrogen import and transportation.

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"LNG imports into Europe increased by 60 percent in 2022 compared to 2021, including a more than twofold increase in U.S. imports, a 23 percent increase in imports from Qatar and a 12 percent increase in LNG imports from Russia."

Was this much excess liquidation capacity just sitting there waiting? Doesn't sound like good research to me!

I don't think that this is liquidation capacity.  I think this was an effort to fill storage capacity.  If memory serves, European natural gas storage was quite low when Russia invaded Ukraine.  All western European companies then made a priority of filling every storage facility that was existing and creating additional.  I don't ever remember that nearing 100% but the milder than normal winter helped to get storage much higher than previous years.

Sorry I meant deliquification capacity. Maybe I am still missing something. When LNG cargoes were diverted from Asia to Europe, they arrive on a ship as LNG at -265 degrees F. You can't put it in a warehouse or ship out on a truck.I think I read that Spain, UK and perhaps Italy had excess capacity. Perhaps IEAFFA is really a anti fossil fuel activists that doesn't want further $ invested in any NG assets, whether LNG or NG pipelines from Norway or North Sea.

Some European countries store natural gas underground.  Just like the US. The countries mentioned as potentially having excess capacity are those that have additional import facilities in the works or planned.  The market assumptions are the same but for Europe the concern is continuing to build more import and storage capacity than the EU may require while over here the concern is building too much export capacity.  That is why the race to FID for US plants is so competitive.  Each new project, whether a new plant or an increase in capacity for an existing plant, makes it harder to find buyers and funding for those still on the drawing board or in the regulatory review period.


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