LNG’s role in ensuring European supply security

Gas Interview 29 June 2021 16:57
Baku, Azerbaijan Trend News Agency Leman Zeynalova
LNG’s role in ensuring European supply security

Liquified natural gas (LNG) is an important source to ensure security of supply on European gas markets, Eurogas association told Trend.

It offers liquidity which reduces costs for industry and consumers, complementing pipeline infrastructure, said Eurogas.

Why is LNG important for the EU's security of supply?

The EU is the biggest importer of natural gas in the world. Diversification of supply sources is therefore paramount both for energy security as well as for competitiveness. Ensuring that all Member States have access to liquid gas markets is a key objective of the EU's Energy Union. Cargoes of LNG are available from a wide variety of different supplier countries worldwide, LNG can give a real boost to the EU's diversity of gas supply and hence greatly improve energy security. Today, the countries in western Europe that have access to LNG import terminals and liquid gas markets are far more resilient to possible supply interruptions than those that are dependent on a single gas supplier. The global LNG market is undergoing a dynamic development with the entrance of new suppliers such as the US or Australia.

Gas Infrastructure Europe says LNG plays an essential role in enhancing security and diversification of both sources and routes of supply in Europe. LNG makes gas reserves around the world accessible to the European market, contributing to competition. The high level of flexibility of LNG supplies together with the low emission of the natural gas make LNG the ideal partner for the development and integration of intermittent renewable energy such as solar and wind. The use of LNG as a fuel for shipping or heavy-duty vehicles offers an excellent opportunity for improving the environmental footprint of the transport sector.

2020 LNG imports by Europe

The data provided by the European Commission shows that in 2020 LNG import volumes in the EU amounted to 84 bcm (representing an estimated value of €8.3 billion), down from 88 bcm (€13.1billion) in 2019. In 2020 the biggest LNG importer countries in the EU were Spain (21.4 bcm), France (20 bcm), Italy (12 bcm), Netherlands (7.8 bcm) and Belgium (7.4 bcm).

In 2020 as whole, the biggest LNG supplier of the EU were the United States, exporting 18.8 bcm of LNG to the block of 27, which represented 22 percent of the total EU LNG imports. Qatar exported 18 bcm to the EU, having a share of 21 percent, followed by Russia (17 bcm -20 percent). Nigeria exported 12 bcm of LNG to the EU (14 percent), whereas Algeria had a share in the EU LNG imports slightly less than 10 percent, with imports of 8 bcm. The share of other LNG suppliers remained below 5 percent in 2020.

Outlook for 2021

The Oxford Energy Institute believes that if gas consumption in Europe is assumed to rise back to 2019 levels – which were higher than 2018 as a result of the coal-to-gas switching in power – then with 55 bcm of storage injection there is room for 55 bcm of LNG imports, similar to 2019 and 2020 levels.

Eurogas association says LNG cargoes may drift apart from Europe, thereby giving boost to pipeline imports. New sources of supply from the US means that more LNG is readily available to the European market from Atlantic Basin sources. However, as LNG is traded on a global market with flexibility of supply, it is available to any market when their demand increases. This may ‘pull’ LNG cargoes away from European markets to those offering higher prices, with the European market replacing the ‘lost’ supply through increasing pipeline imports or, initially, taking additional gas from storage.

Global LNG supply forecasts

International Energy Agency (IEA) expects that in 2021 global liquified natural gas (LNG) trade is projected to expand by 4 percent, a slower pace relative to the 2015-2019 average annual rate of 10 percent. LNG import growth is set to be driven solely by the Asia Pacific region, which is expected to see a 7 percent increase in LNG inflows, while all other regions are poised to see declining imports. Despite the steep drop in Q1, LNG influx into Europe is expected to remain relatively strong in 2021, albeit below the 2019 and 2020 levels.

LNG versus pipeline gas

While the process of piping natural gas to market is relatively straightforward, the LNG value chain is more complex, according to Wood Mackenzie. This is due to the relatively high energy — and consequently carbon — intensity associated with the liquefaction of natural gas and the requirement for any contaminating CO2 to be removed from feedstock gas.

When likening the emissions associated with typical pipeline and LNG projects (wellhead to FOB point) to carbon-intensive Canadian oil sands developments, Wood Mackenzie found the emissions of the former were relatively low while the latter ranked comparably.

However, making a direct comparison between LNG and pipeline gas isn’t entirely fair. One of the most important variables affecting emissions from an LNG project is the contaminant CO2 content of the feedgas — a high concentration of which can result in substantial additional emissions from venting.