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Europe’s LNG capacity buildout outpaces demand, says IEEFA

Data shows additional import capacity is not required, the institute says

Europe’s buildout of liquefied natural gas capacity, which accelerated after Russia’s invasion of Ukraine last year spooked global energy markets, has outpaced LNG demand, according to the Institute for Energy Economics and Financial Analysis (IEEFA).

The gap between Europe’s LNG capacity and demand continues to widen. Europe has added six new import terminals in 2023 alone, plus a previously mothballed terminal and a new floating storage and regasification unit that is docked but not yet operational. Meanwhile, LNG imports have flattened and gas consumption keeps declining, IEEFA said on Tuesday.

“The decline in gas demand is challenging the narrative that Europe needs more LNG infrastructure to reach its energy security goals. The data is showing that we don’t,” said Ana Maria Jaller-Makarewicz, an IEEFA energy analyst.

“Despite significant progress towards reducing gas consumption, countries in Europe risk trading a reliance on Russian pipelines for a redundant LNG system that further exposes the continent to volatile prices.”

Europe has added 36.5 billion cubic metres of new LNG capacity since the beginning of 2022. LNG consumption has only increased by 4.8 Bcm so far this year, a much smaller rise than the 46.2 Bcm increase in the same period last year.

Although Russian pipeline gas supplies to Europe have been disrupted, Russian LNG supplies to the continent have so far remained steady in 2023 with Spain, France and Belgium the biggest importers, IEEFA noted.

The European Union alone has spent €41 billion ($43.54 billion) on LNG imports between January and July 2023, with the US (€17.2 billion), Russia (€5.5 billion) and Qatar (€5.4 billion) being the largest beneficiaries, the institute said.

The utilisation rate of Europe’s LNG terminals averaged just 58% between January and September this year.

“In the face of declining European gas consumption, it raises questions as to whether Europe needs to build additional LNG infrastructure through 2030,” IEEFA said.

“While European LNG imports from January to September 2022 increased by 62% in comparison with the same period in 2021, LNG imports in 2023 have flattened, increasing just 4% year-on-year. Meanwhile, the European Union has met its winter gas storage targets ahead of schedule.”

As of September 2023, the EU, Turkey and the UK had imported a total of 125 Bcm of LNG.

The annual import capacity of European LNG terminals is forecast to reach 406 Bcm by 2030 as new terminals come online, while the continent’s total gas demand is expected to fall to around 400 Bcm over the same period as the continent pushes ahead with gas demand reduction policies, according to IEEFA, which examines issues related to energy markets, trends and policies.

The institute’s stated mission is to accelerate the transition to a diverse, sustainable and profitable energy economy.

Source : Up Stream