“ There may not be room for any of these projects to exist , depending on which way the economy goes ”
LNG imports into Europe looked poised to set a fresh record in the first half of last year when mounting US production struggled to find a home in a world of coronavirus lockdowns and plunging energy demand . But those volumes tumbled in the latter half of the year and remained at bay as a cold winter drew cargoes to Asia where some customers were willing to pay prices exceeding EUR 90 / MWh .
On balance , Europe only used its LNG import terminals at an average of 45 % of their capacity last year , according to Icis estimates . Even during the record LNG import year of 2019 , use-rates only averaged about half their potential . The continent already has an abundance of LNG terminals . A new one has just come online in Croatia and Poland is also set to expand its capacity .
Low average EU-wide use rates obscure variations between facilities and over time , says David Ledesma , chair of the Natural Gas Research Programme at the Oxford Institute for Energy Studies . “ If you look locationally , there is a need for additional capacity in north-western Europe ,” Ledesma says .
Use of the nearby Gate terminal in the Netherlands , for example , approached 65 % last year . Ledesma expects at least one German terminal to procced , especially given the long distances to areas with potential spare capacity in south-western Europe .
Another issue is the EU ’ s goal of becoming carbon neutral by midcentury , and whether investors think a new LNG facility will have a future beyond 2030 . The European Commission has said it sees no role for natural gas in Europe ’ s energy mix by 2050 – unless its emissions can be captured and eliminated . EU targets to increase heating efficiency , boost electrification and roll out renewable energy all pose threats to natural gas demand .
The industry ’ s only hope may be to develop hydrogen as a clean fuel – specifically through natural gas . German hydrogen plans would leave “ a huge gap ” for the market to fill by 2030 , Uniper CEO Andreas Schierenbeck told this year ’ s European Gas Conference . Berlin aims to develop 5 GW of electrolysis capacity this decade to make green hydrogen with renewable energy .
However , this will only create 14 TWh worth of the fuel , compared to German demand of up to 100 TWh , according to Schierenbeck . He sees imports as the solution . Especially imports of blue hydrogen , won through natural gas with its emissions sequestered in countries more open to carbon capture and storage . Blue hydrogen imported via the Netherlands or Norway is likely to be the most competitive source of the fuel by 2030 , according to consultancy Aurora Energy Research . Green hydrogen shipped from Morocco , with its abundant cheap solar potential , could also undercut German competitors , Aurora says .
All three potential German LNG terminal developers have hinted at fitting their plans around this kind of future . “ The fundamentals for a German LNG terminal still look robust ,” says Murray Douglas , Wood Mackenzie research director for European gas . “ I think what we ’ ll see is that in order to get investors comfortable , [ developers ] are going to have to come up with answers towards a gradual progression to hydrogen .” n
Montel Magazine 1 – 2021