Southern Europe , and the ( European ) East Mediterranean , with smaller distinct markets in North-Eastern Europe and the Baltic region . Separately there is a concept of a Euro- Mediterranean region which , in addition to the EU Member States and the UK , encompasses Turkey , Israel , and the North African LNG-producing Mediterranean nations .
This article considers some of the distinct characteristics of Europe ’ s LNG sub-regions , the role of LNG in the Mediterranean , and potential synergies across the Euro- Mediterranean region .
From North to South and in-between
North-West Europe
The North-West Europe LNG sub-region ( or ‘ hub ’) loosely covers the importing countries of the UK , Belgium , the Netherlands , and northern France . Germany is poised to become the next member of the North-West Europe LNG club due to the country ’ s phasing out of coal and lignitefuelled power production . The UK and France ( after Spain ) have the second and third largest regasification capacity in Europe , respectively .
North-West Europe boasts significant gas storage capacity and a highly developed and integrated pipeline network that allows regasified LNG that is imported into any of the North-West European LNG terminals to be supplied into a number of Northern and Central European countries , including landlocked Austria and Switzerland . North-West Europe has suffered the most from the rapid decline in natural gas production from the Netherlands ( including the phase-out of production from Groningen , Western Europe ’ s largest gas field , which is scheduled to cease operations in mid-2022 ) and the UK North Sea . Whilst the roll out of renewable energy in North-West Europe , particularly offshore wind , is meeting some of the region ’ s electricity demand , gas remains a key fuel for the region and the decline of domestic production increases the region ’ s reliance on LNG and natural gas imports .
LNG demand in North-West Europe ( in particular ) is highly seasonable due to cold winters in the sub-region and prices typically spike over the winter months . The baskets of LNG spot prices for LNG sales into North-West Europe will typically have a Dutch ( virtual ) Title Transfer Facility ( TTF ) linked component . Whilst LNG sales into the UK ’ s three large scale LNG terminals are still often linked to the UK ’ s ( virtual ) National Balancing Point ( NBP ) prices , the TTF index is starting to prevail as the key price index for North-West Europe . North-West Europe ’ s extensive storage capacity allows LNG producers to unload and store cargoes in the region during periods when demand is weak ( and prices are therefore lower ) in the premium Asian market . However , North-West Europe entered into winter 2021 / 2022 with storage levels at approximately 70 % of capacity ( as of the beginning of December 2021 ) following an unusually cold autumn – levels which some say are worryingly low – as a result of the high price of buying LNG or gas to fill them .
The US was the biggest LNG supplier to the Netherlands in 2Q21 ( 56 %), while Russian LNG accounted for most of Belgium ’ s imports ( 48 %). France received approximately the same amount of LNG from the US and Russia in the same period ( 29 % each ), whilst Qatar accounted for 60 % of the UK ’ s LNG imports .
Baltic Sea region
Further north , the Baltic Sea is an arm of the Atlantic Ocean , enclosed by Denmark , Estonia , Finland , Germany , Latvia , Lithuania , Poland , Russia , and Sweden . Poland ’ s Świnoujście onshore LNG terminal and Lithuania ’ s Klaipėda FSRU both sit in North-East Europe and supply regasified LNG into Eastern Europe , diversifying gas supply to an area that has historically relied on Russian pipeline gas for 100 % of its gas supply . Sweden and Finland currently only have small scale LNG markets . Kaliningrad , the Russian exclave on the Baltic Sea , also has an FSRU for receipt of Russian LNG . A number of large scale and small scale stand-alone or integrated LNG import projects are either proposed or under development in the eastern Baltic countries of Estonia and Latvia . European Russia , along with Norway , are Europe ’ s only two LNG exporting countries . Whilst Norway is a large exporter of gas generally , only 5 % of its exports are in the form of LNG . Norway ’ s LNG exports are from the Hammerfest LNG terminal , which liquefies gas produced from the Snøhvit field in the Barents Sea , within the Arctic Circle . The Hammerfest LNG terminal has been closed for repairs following a fire in September 2020 and is due to restart operations in 1Q22 .
In 2Q21 , US LNG met the majority of Lithuania ’ s ( 48 %) and Poland ’ s ( 41 %) LNG demand .
Southern Europe
Spain and Portugal and , in some contexts , Italy , make up the Southern Europe LNG sub-region . The Spanish and Portuguese gas networks are inter-connected but are not connected to the rest of Europe , largely due to the impracticalities of building gas pipeline infrastructure across the Pyrenees Mountains which sit between France and Spain . Instead , Spain and Portugal rely heavily on LNG and natural gas imports from Algeria . Regasified LNG is Portugal ’ s largest source of gas supply . The country purchases most of its LNG under long-term contracts , but it also depends on the LNG spot market to meet spikes in gas demand especially during winter , which has made Portugal extremely exposed to recent high global LNG spot prices . The separation of the Spanish , Portuguese , and Italian LNG markets from the rest of continental Europe creates flexibility in LNG pricing models . The Punto di Scambio Virtuale ( Virtual Trading Point ) ( PSV ) is the main price indicator for LNG sales to Italy , and the Punto Virtual de Balance ( PVB ) has become the key indicator for LNG sales to Spain and Portugal , both of which have stayed higher than TTF prices throughout 2021 . This enabled these Southern European countries to compete with typically higher Asian LNG spot prices over 2Q21 and 3Q21 when North-West European cargos were being redirected to Asia .
The US was the biggest supplier of LNG to Spain ( 22 %) in 2Q21 , with Nigeria meeting most of Portugal ’ s LNG demand ( 42 %). Qatar was the biggest supplier to Italy in that period ( 54 %).
The other LNG importing countries in Southern Europe are Croatia , Greece , Turkey ( which straddles Europe and Asia ), and the island of Malta which imports LNG for power generation only and still does not have its own gas pipeline network . Croatia ’ s Krk island FSRU is strategically located to supply gas into landlocked Eastern Europe which relies heavily on Russian pipeline gas . Cyprus will join the ranks of southern European LNG importers when its FSRU offshore Vasilikos comes into operation , scheduled for the end of
Reprinted from February 2022