Page 9 - EurOil Week 33

EurOil COMMENTARY EurOil

Competition does not necessarily mean rising flows of the
As Europe’s regasification capacity rises, LNG fuel from the US to Europe over the longer term.
can be seen to be competing more and more with German economic research institute DIW said
pipeline gas imports to the continent. last month that it expected Europe to receive
According to the GECF, the EU currently a smaller share over the coming decades. The
accounts for 55% of global net pipeline gas institute has estimated that Europe could take
imports. The group estimates that in 2019, pipe- around 30% of overall US exports in 2020, with
line gas imports from outside the EU fell 4% year the share falling to 20% by 2030 in DIW’s base-
on year to 311bn cubic metres, while in the first case scenario, then to 12% by 2040 and just 2%
half of 2020 – exacerbated by the COVID-19 cri- by 2050. Instead, the institute expects more US
sis – they shrank by 19% y/y to 129 bcm. LNG to flow to Asia-Pacific in particular, and
LNG imports into the EU, meanwhile, rose also Latin America from the 2030s.
by 48 bcm to 102 bcm – a record high – in 2019. DIW has also questioned the need for some
This amounted to 24% of total EU gas imports, of Europe’s proposed regasification capacity,
displacing pipeline gas imports to a degree, the including in Germany. The institute said that
GECF said. And unlike pipeline imports, EU even under its most “drastic” scenarios, Europe’s
LNG imports continued to rise in the first half of existing import capacity is sufficient to handle
2020, growing by 12% y/y to 57 bcm. demand. The outlook
The GECF anticipates that by the end of 2020, The outlook for new regasification capacity
pipeline gas imports could remain below 2019 has been clouded further by this year’s market for new
levels. It added that they could be continuously downturn as a result of COVID-19. Global regasification
pushed out of the supply mix by LNG imports, Energy Monitor also warned of headwinds
though the contractual obligations of the EU facing the industry, noting that construction capacity has
importers under take-or-pay clauses will pre- of new capacity represents an expansion of risk
vent a larger drop in pipeline gas supplies. Mean- for developers and investors. As a result, it con- been clouded
while, it expects LNG imports to remain flat or tinued, some projects that had not yet reached
even increase slightly on a y/y basis by the end of the construction stage were being abandoned further by this
2020. This is despite the fact that Europe remains globally. year’s market
“the market of last resort” for LNG, according to The organisation highlighted the Gothen-
the group. burg LNG project, proposed for Sweden, and downturn as
Shannon LNG in Ireland as being “troubled”,
What next? with both projects having been withdrawn from a result of
The GECF noted that the emergence of the US the EU’s Projects of Common Interest (PCI) list.
as a major supplier of LNG has been a significant If DIW’s projections for European capac- COVID-19.
trend recently, and one which has contributed to ity and demand play out, it would not be sur-
the intensifying competition between pipeline prising if more projects become troubled – or
gas and LNG. are cancelled outright, even as regasification
However, while the US’ share of the global capacity and LNG imports to the continent
LNG market is set to continue growing, this keep expanding.™

Week 33 20•August•2020 www. NEWSBASE .com P9