Page 10 - GLNG Week 32
P. 10
GLNG COMMENTARY GLNG
Competition
As Europe’s regasification capacity rises, LNG can be seen to be competing more and more with pipeline gas imports to the continent.
According to the GECF, the EU currently accounts for 55% of global net pipeline gas imports. The group estimates that in 2019, pipe- line gas imports from outside the EU fell 4% year on year to 311bn cubic metres, while in the first half of 2020 – exacerbated by the COVID-19 cri- sis – they shrank by 19% y/y to 129 bcm.
LNG imports into the EU, meanwhile, rose by48bcmto102bcm–arecordhigh–in2019. This amounted to 24% of total EU gas imports, displacing pipeline gas imports to a degree, the GECF said. And unlike pipeline imports, EU LNG imports continued to rise in the first half of 2020, growing by 12% y/y to 57 bcm.
The GECF anticipates that by the end of 2020, pipeline gas imports could remain below 2019 levels. It added that they could be continuously pushed out of the supply mix by LNG imports, though the contractual obligations of the EU importers under take-or-pay clauses will pre- vent a larger drop in pipeline gas supplies. Mean- while, it expects LNG imports to remain flat or even increase slightly on a y/y basis by the end of 2020. This is despite the fact that Europe remains “the market of last resort” for LNG, according to the group.
What next?
The GECF noted that the emergence of the US as a major supplier of LNG has been a significant trend recently, and one which has contributed to the intensifying competition between pipeline gas and LNG.
However, while the US’ share of the global LNG market is set to continue growing, this
does not necessarily mean rising flows of the fuel from the US to Europe over the longer term. German economic research institute DIW said last month that it expected Europe to receive a smaller share over the coming decades. The institute has estimated that Europe could take around 30% of overall US exports in 2020, with the share falling to 20% by 2030 in DIW’s base- case scenario, then to 12% by 2040 and just 2% by 2050. Instead, the institute expects more US LNG to flow to Asia-Pacific in particular, and also Latin America from the 2030s.
DIW has also questioned the need for some of Europe’s proposed regasification capacity, including in Germany. The institute said that even under its most “drastic” scenarios, Europe’s existing import capacity is sufficient to handle demand.
The outlook for new regasification capacity has been clouded further by this year’s market downturn as a result of COVID-19. Global Energy Monitor also warned of headwinds facing the industry, noting that construction of new capacity represents an expansion of risk for developers and investors. As a result, it con- tinued, some projects that had not yet reached the construction stage were being abandoned globally.
The organisation highlighted the Gothen- burg LNG project, proposed for Sweden, and Shannon LNG in Ireland as being “troubled”, with both projects having been withdrawn from the EU’s Projects of Common Interest (PCI) list.
If DIW’s projections for European capac- ity and demand play out, it would not be sur- prising if more projects become troubled – or are cancelled outright, even as regasification capacity and LNG imports to the continent keep expanding.
The outlook for new regasification capacity has been clouded further by this year’s market downturn as a result of COVID-19.
P10
w w w . N E W S B A S E . c o m Week 32
14•August•2020
