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Irina Slav

Irina Slav

Irina is a writer for Oilprice.com with over a decade of experience writing on the oil and gas industry.

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Europe Is Running Out Of Space For LNG

  • Due to high demand and fears that Russia might turn off its gas supply to Europe, the continent has been importing huge amounts of LNG.
  • Now, Europe is fast running out of processing capacity for the gas and the added cost of squeezing more cargoes through other countries wouldn’t be viable.
  • Currently, an estimated two-thirds of U.S. LNG cargoes are set to be delivered to European destinations, but those shipments may soon decline.

After the massive influx of U.S. liquefied natural gas to make up for lower pipeline supplies from Russia amid high demand, Europe is running out of processing capacity for the gas, Reuters has reported.

Europe turned into the biggest market for U.S. liquefied natural gas over the past three months as concern about the geopolitical tensions around Ukraine prompted the EU to seek alternatives for Russian gas in case Moscow turned the taps off, even though Moscow has repeatedly said that it has no such plans.

Because of the increase in LNG shipments to Europe, the United States also overtook Qatar to become the world's largest exporter of the commodity earlier this year. In January, Europe took in over 16 billion cubic meters of American liquefied natural gas, and this month's shipments are also expected to remain elevated, with more than 6 billion cubic meters shipped since the start of February.

Right now, an estimated two-thirds of U.S. LNG cargoes are slated to be delivered to European destinations. Storage, however, is filling up, which means that soon, LNG shipments from the United States might start to decline.

"A few cargoes could be squeezed into some other countries, but not significant supply," Rystad Energy senior analyst Kaushal Ramesh told Reuters. This would require additional logistics, which, Ramesh said, would "burn a hole through buyers' pockets, again."

The European Union has a limited capacity of LNG import terminals where the superchilled gas is regasified before it is sent along pipelines to its final destinations. Spain and France have the biggest import capacity in the EU, with the UK coming in second in Europe as a whole with 50 billion cubic meters in annual nameplate LNG import capacity. Germany, on the other hand, the biggest gas market in Europe, has zero LNG import terminals.

By Irina Slav for Oilprice.com

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  • Mamdouh Salameh on February 18 2022 said:
    This is because Europe has a limited LNG import capacity. This makes ramp-ups of LNG imports quite useless particularly if they are needed to replace Russia’s 40% share of the European gas market. It is also becoming a huge financial drain on European economies.

    Still, neither Norway’s maximum natural gas exports nor the entire LNG exports from the United States, Qatar and Australia could totally replace the almost 200 billion cubic metres per annum (bcm/y) piped by Russia to the EU in addition to an estimated 15-16 million tons a year (mt/y) of LNG. Only Russia can satisfy the EU’s gas demand. However, Russia isn’t going to ship additional gas supplies to the EU until Nord Stream gas pipeline is certified.

    That is why any new sanctions the EU imposes on Russia in the event of the Ukraine crisis escalating into an armed conflict won’t include Russian oil and gas exports and Nord Stream 2. The reason is that Russia will immediately halt all its gas and oil exports to the EU in retaliation thus prolonging and worsening an already damaging energy crisis.

    Russia isn’t dependent on the EU for its gas exports. It could easily shift its entire gas and LNG exports to the EU to China which is the world’s largest gas market.

    Dr Mamdouh G Salameh
    International Oil Economist
    Visiting Professor of Energy Economics at ESCP Europe Business School, London

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