More than half of Europe's LNG import capacity could become stranded assets by 2030 as current LNG buildout plans are set to vastly exceed projected demand for liquefied natural gas by the end of the decade, the Institute for Energy Economics and Financial Analysis (IEEFA) said in a new analysis this week.
The EU is boosting its LNG import capacity and is ready to welcome even more LNG cargoes this year and in the coming years, Maros Sefcovic, European Commission Vice President for Interinstitutional Relations and Foresight, said earlier this month. The EU is getting ready for more LNG by reinforcing its import capacity infrastructure, Sefcovic added.
Current infrastructure buildout plans suggest that Europe's LNG terminal capacity could exceed 400 billion cubic meters by 2030, up from 270 billion cubic meters at the end of 2022, IEEFA said in its report.
However, demand for LNG by 2030 will range between 150 bcm according to IEEFA forecast, and 190 bcm according to S&P Global Commodity Insights forecast, the analysis showed.
By 2030, IEEFA forecasts a 36% utilization rate of Europe's LNG terminals, including those that are currently being planned and being built.
Spain, Turkey, the UK, France, Italy, and Germany are at the highest risk of seeing stranded LNG infrastructure assets in 2030, the analysis showed.
"This is the world's most expensive and unnecessary insurance policy. Europe must carefully balance its gas and LNG systems, and avoid tipping the scale from reliability to redundancy," said Ana Maria Jaller Makarewicz, author of the analysis and Energy Analyst for IEEFA Europe.
"Boosting Europe's LNG infrastructure will not necessarily increase reliability-there's a tangible risk that assets could become stranded."
"Decisions to expand Europe's LNG infrastructure must be based on future demand needs, and take into account that the EU is planning to reduce gas demand by at least one-third by 2030," the analyst added.
By Tsvetana Paraskova for Oilprice.com
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Comments
Now the EU is going to commit another mistake by planning to expand its LNG import capacity to 400 billion cubic metres (bcm) by 2030 when its projection is that it only needs to import 150-190 bcm by then. Moreover, it already has an LNG import capacity of 270 bcm enough to cover its needs beyond 2030.
Furthermore, the EU economy can’t afford to cover the bulk of its gas needs with LNG imports since LNG is far more expensive than piped gas. It will impose a very heavy burden on European economies.
Europe’s economies led by Germany’s were built on cheap and plentiful Russian piped gas since the 1960s which is far cheaper than LNG. That is why I expect the EU to resume importing Russian piped gas within the next two years either via repaired Nord Stream 1 and Nord Stream 2 gas pipeline or via TurkStream pipeline from Turkey.
Dr Mamdouh G Salameh
International Oil Economist
Global Energy Expert