The European Investment Bank (EIB) will provide a 110 million loan for the construction of a gas systems interconnection facility between Bulgaria and Greece (ICGB). The loan will be provided to the Bulgarian state-owned Bulgarian Energy Holding company, while ICGB AD will be the project promoter and beneficiary and it will focus on developing, constructing, financing, owning and operating the pipeline.
The interconnector will also help establish a link with the Trans Adriatic Gas Pipeline (TAP), which runs from east to west through northern Greece.
The project is in line with the strategy of energy supply’s diversification in Bulgaria and south-eastern Europe. It is part of a wider plan to better connect energy markets among neighbouring countries (including Romania and Hungary) with the aim of improving the security of gas supplies in the region and the efficiency of the networks.
The 182 kilometres long gas pipeline comprises 151 kilometres in Bulgaria (connected to the Bulgarian gas transmission backbone in Stara Zagora) and 31 kilometres in Greece (linked to the Greek gas system and to the TAP in Komotini).
The initial capacity of the new pipeline will be 3 billion cubic metres per year (bcm/y), with a possible increase to 5 bcm/y by adding a compressor station.
“The systematic and consistent corporate efforts of the ICGB team, the political will of the governments of Bulgaria and Greece and the strong support of the European Commission helped us finalise key documents that regulate the model of operation of the gas pipeline and allow progress in carrying out construction activities”, noted the Executive Officers of the project company Teodora Georgieva and Konstantinos Karayannakos.
The project has been included on the list of Projects of Common Interest (PCI), which are key cross border infrastructure projects that link the energy systems of EU countries.KEEP READING
Latvia is considering South Korean Gas Corporation Kogas as a strategic partner for its planned liquefied natural gas (LNG) terminal near Riga.
The terminal will be built in the Gulf of Riga, about 2.5 kilometres from the coast, while a 40 kilometres gas pipeline will run from the port of Skulte to the Inčukalns underground gas storage facility. The total investment is estimated at 90 million euros.
Although the name of the potential strategic partner has not been officially confirmed yet, the Latvian Ministry of Economics admitted that Kogas is interested in the project and that Minister Ralfs Nemiro will discuss the matter with his South Korean counterpart late in October.
Currently, the Klaipeda LNG Terminal in Lithuania is the only operational terminal in the Baltics, whose total market consumption is around 4.5 billion cubic metres (bcm). Lithuania is the largest consumer (2.6 bcm), followed by Latvia (1.5 bcm) and Estonia (0.6 bcm).
While the Tallinn and Paldiski projects in Estonia are very similar to Klaipeda in terms of investment and economic evaluation, the Skulte LNG Terminal is considered to be the most competitive LNG import terminal project in the region.
The Skulte LNG Terminal project has unique geographic, economic and technological advantages over any other LNG import terminal proposal. In fact, thanks to the Inčukalns’ storage capacity of 2.3 bcm, a cold storage facility won’t be needed (usually it takes 70-80 per cent of LNG import terminal building cost). Therefore, the total project investment is at least three times lower than any other LNG terminal solution of comparable capacity with LNG cold storage facility.KEEP READING
MET Group faces largely similar challenges to the other players in the energy industry. The drastic changes and turbulences in energy markets splits these challenges into two aspects. In the first one, in the traditional segments of the industry, the market is shrinking or stagnating, with decreasing revenues as a result. Cost cuts and consolidation of ownership structures become necessary, and value can only be created through cost cutting and via synergies. Obviously, organic growth is rather difficult in such a scenario.
In other parts of the energy industry, we can see the ongoing boom in Renewables, the development of power storage solutions, demand-based balancing structures, and new, more competitive sources appearing in the market. In this second scenario, the future is certainly about renewables and power storage, but it is still difficult to foresee which of the many competing alternatives will replace the more established solutions. What if someone was to bet on biomass, for example, but solar energy would prevail?
I think the ultimate solution will involve a mixed approach. MET Group is, above all, a well-positioned player of the first scenario, with diverse and well-established abilities. We have proved to be successful in transforming companies in great difficulties into profitable and sustainable operations. Our innovative approach is a great advantage, but there are many other innovative firms, often with much larger investment potential, who operate in the Renewables marketplace, and here MET has chosen a trend following strategy.
Two trends that everyone must take into account are growth in the green/renewable energy generation and new power storage solutions. We are still not quite sure exactly how some very exciting new trends – like Blockchain technologies, artificial intelligence (AI), increased computing capacity, Big Data – will transform the energy industry. These may seem to be far removed from our somewhat old-fashioned industry, but they certainly have an impact on the entire world and the energy industry cannot remain in isolation. As for the Blockchain, we do not know if market structures will remain the same or if everything will be standardized in commodity trading. We talk a lot about smart solutions based on Big Data, but we still do not know how exactly our industry will integrate these new technologies beyond what has been achieved so far.
In addition, the global political turbulence of recent years creates a great amount of uncertainty in the business. Volatility increases and predictability diminishes, and this is something we have to consider and deal with as well.
A significant change in international gas markets is that they are becoming global thanks to the rapid growth of LNG, this is a development that MET Group welcomes. Since LNG has become a truly globally traded commodity, gas markets cannot be seen as isolated from each other anymore.
It is unclear how this will impact the CEE markets in the long term; for the time being this impact has been moderate. The legal background of the EU’s internal market and the legislation on unbundling have contributed greatly to the establishment of an integrated market in Central and Eastern Europe. However, the region’s participation in the global energy market is realized only through contracts with Russia and through the link to the TTF gas exchange. Central Europe is not yet fully integrated in the global gas commodity trading, largely due to the obvious geographic constraints. But with new infrastructure under development – Nord Stream 2, South Stream, Trans Adriatic Pipeline, LNG terminals in Croatia and Poland – CEE will become an integral part of this global gas market.
The forecasts we made five years ago about LNG are coming true: regional LNG markets are converging into a single, global market, so we see a high probability that Europe will play a leading role in defining the price levels for this market. Over the past decades, this role has been played largely by Asia, where gas prices stayed at about twice the European level. However, Europe has now managed to become a balancing buyer in the LNG market.
MET increased its LNG imports substantially in 2019, mostly into the Mediterranean region (Spain, Italy). But we, like the rest of the industry, are still some way away from a single European LNG price reference point.KEEP READING
Hungarian gas pipeline owner FGSZ inaugurated its new gas compressor station in Csanádpalota, near the Romanian border.
The station will allow the delivery of 1.75 billion cubic meters of gas from Romania to Hungary via the ROHU gas pipeline. The cross-border pipeline is already capable of delivering this amount to Romania, and as a result of this 6 billion forints investment, the possibility of reverse transmission will significantly expand.
“The investment in Csanádpalota as part of the ROHU gas pipeline development is an important milestone in the BRUA gas pipeline project,” said FGSZ Chairman and CEO Szabolcs Ferencz I. “The BRUA project is implemented with international cooperation, and aims to establish a gas corridor connecting Bulgaria, Romania, Hungary and Austria. I am proud of the performance of my colleagues and partners involved in the construction, which has enabled the Csanádpalota compressor station to be built in a cost-effective way while meeting high professional standards.”
The pipeline is currently operating at full capacity between Hungary and Romania, and gas transport to Hungary is expected to start by mid-2020 following the developments of the Romanian side. As much larger volumes of bi-directional gas transport are thus available at the south-eastern border of the country, other gas resources besides the Romanian one may be transported to our region in the future. The supply security, the development of the regional energy market and the BRUA gas pipeline playing a crucial part in the dynamics of bilateral energy connections all contribute to the importance of this project for Hungary.
“Security of energy supply means a historic challenge for the countries of the European Union,” said the Hungarian Minister of Foreign Affairs and Trade Péter Szijjártó.
In fact, after negotiations with Russian giant Gazprom, Hungary’s natural gas supply has been guaranteed until the winter of next year and all of the country’s gas storage facilities are full.
“We will see progress only if each country develops its own infrastructure and interstate connections, which also allows us to receive gas from new sources,” continued Mr Szijjártó. “Hungary has completed its task, and words were followed by actions: from May 2020 on, 1.75 billion cubic meters of gas may be transported annually. It has great importance not only for Hungary and Romania but also relevant for the whole region of South-Eastern Europe. It’s time for the other countries to do their homework as well.”
Since October the entire, nearly 6000 km long high-pressure natural gas transmission pipeline system of Hungary is operated by FGSZ after the company took over the operation of the 92 km long natural gas transmission pipeline from MGT Ltd. connecting Hungary to Slovakia.
FGSZ is a partner of the Budapest LNG Summit.KEEP READING
Russian gas producer Novatek reassured that the Yamal LNG project in northern Russia will not be affected by the recent US sanctions imposed on two units of Chinese shipping conglomerate COSCO, for allegedly carrying Iranian crude oil.
US-listed Teekay LNG, owner of four tankers shipping gas for the Yamal LNG plant, has also been blocked. In fact, its partner China LNG Shipping (CLNG) is 50 per cent owned by COSCO Dalian, which makes Teekay indirectly tied to the Chinese shipping group as well.
“That indirect 50 per cent interest causes our joint venture company to be a blocked person under the US rules,” Teekay confirmed.
“The issue to resolve this situation is a business relations matter between Teekay LNG and CLNG,” stated Novatek. “The Yamal LNG project has all the necessary capacities to ensure supplies of LNG produced to customers in accordance with contractual obligations within the agreed timelines.”
In fact, the Yamal plant has been producing and shipping LNG above its expected capacity of 16.5 million tonnes a year (mtpa), reaching in 2019 12.8 mtpa.
At the same time, Novatek is working on the construction of three LNG reloading points that might allow tankers to only sail in Russian waters, thus avoiding possible new sanctions.
Moreover, early in September, Novatek approved a final investment decision for the Arctic LNG 2 project, consisting of the development of the Utrenneye field and the construction of a natural gas liquefaction plant on the Gydan Peninsula in the Russian Arctic region. The LNG plant will consist of three liquefaction trains with overall production capacity of 19.8 million tons per annum, starting from 2023.
Mark Gyetvay, CFO & Deputy Chairman of the Management Board at NOVATEK, will be one of the speakers of Budapest LNG Summit.KEEP READING
Petronet LNG and U.S. liquefied natural gas developer Tellurian Inc signed an initial agreement under which the Indian company and its affiliates will negotiate to buy up to 5 million tonnes per annum of liquefied natural gas, the companies said on Saturday.
Petronet will take an equity investment in Tellurian’s Driftwood project in Louisiana, they said, without providing financial details. The companies said they would try to finalize the deal by March 31, 2020.
Sources told Reuters on Friday that Petronet would sign a memorandum of understanding with Tellurian to invest $2.5 billion for rights of up to 5 million tonnes a year of LNG over the lifespan of the Driftwood project.
The announcement comes as Indian Prime Minister Narendra Modi and U.S. President Donald Trump are set to meet in Houston this weekend to discuss ways to deepen their energy and trade relations.
by Rosalba O’Brien www.reuters.comKEEP READING
We are pleased to share with you some of the key announcements made by top energy leaders on Gastech, Houston. High-level representatives from all this companies will be present on Budapest LNG Summit in December.
„A big part of our energy grid needs to be electrified and most of that electricity needs to be provided by renewables and cannot have that happen without a backup in the system that natural gas can provide. Increasingly energy storage will play a important role, but there will always be a big need for natural gas. I belive, that natural gas has a super important role to play for several decades to come as the world transitions to a zero emission energy” De LaRey Venter, Executive Vice President, Integrated Gas Venture, Shell
„We are moving into a commodised industry and we need to bring portfolio gas to the market, which can be much more flexible. By the end of this year and start of next year we will begin construction with our partners. At 200 mtpa of exports, U.S. LNG will have the potential to reduce global CO2 emissions by about 1 gigatonne, if used to displace coal fired power generation. The success of LNG in supplying cleaner fuel to some of the world’s most congested cities depends only on the ability of LNG supply to keep pace.” Meg Gentle, President and CEO, Tellurian
„We gave FID approval recently for Artic 2 LNG project, we will step into the market place to create demand for our LNG. The idea is to service and develop new markets that need gas so we’re going to take an equity position in projects going forward. We have to work very closely with EPC contarctors and they have to be involved closely from the beginning” Mark Gyetvay, Deputy Chairman & CFO of Novatek.
„Natural gas produces up to 60% fewer CO2 emissions than coal, leading to significantly fewer pollutants, which in turn would have huge envronmental benefits.
Natural gas is ideal partner to support power generated by intremittent renewables. It is reliable, efficent and flexible – making gas suited to help meet peak demand and play a crucial role in securing our cleaner energy future. LNG in particular is a game changer, allowing us to ship this cleanre burning fuel in quantities, that we have not seen before” Alex Volkov, VP and Head of Global LNG Marketing, ExxonMobilKEEP READING
Global LNG trade is buoyant due to a wave of new sources of LNG supply. What were historically distinct, regional LNG markets are becoming increasingly interconnected as the global LNG market evolves and diversifies. Against this background, Europe’s LNG import terminals are gaining momentum and prominence in the global LNG market.
The Northern European LNG import terminals have, on balance, absorbed higher levels of additional LNG volumes than the Southern European LNG import terminals. The highest increase in LNG imports (and therefore terminal utilisation rates) in 2018 was in the Netherlands (Gate), followed by Belgium (Zeebrugge), Turkey, Poland, and France. 2018 saw only moderate increases in LNG imports into the UK where utilisation rates remain relatively low. LNG imports into Spain – which has the largest regasification capacity in Europe – decreased slightly in 2018, in part due to Spain’s relatively illiquid gas wholesale market (compared to some of its North European neighbours).
New Players in the European LNG Market:
Historically, the global LNG market has been dominated by the oil and gas majors and NOCs (on the supply side), and large utilities and power producers (on the buyer side). The growth of the LNG spot market, and new opportunities to take short-term positions, has created an environment in which smaller players can take a position in the LNG market without being exposed to long-term take-or-pay commitments or significant capital expenditure. Recent years have witnessed the global LNG market start to open up to new types of entrants, nowhere more so than in the US, where the growth of the LNG export sector has largely been driven by a range of independent gas companies and private equity outfits (such as Cheniere and Freeport).
The European LNG market is also starting to open up to new players. A number of LNG commodity traders (who do not own the gas at source) are becoming increasingly active in the European LNG spot market – such as Vitol and Trafigura. There are also signs that private equity firms are dipping their toes into more long-term positions – as seen by Ancala Partners’ recent acquisition of a 50% interest in Dragon LNG (an LNG import terminal in Milford Haven, Wales) from Petronas LNG. In fact, as the European LNG sector diversifies and expands, new entrants are emerging at every stage of the LNG supply chain, all the way down the line to LNG-fuelled cruise ships.
Europe’s Existing Regasification Capacity
The vast majority of Europe’s LNG terminals are import facilities, with the only exceptions being in (non-EU) Norway and Russia which export LNG. There are currently 28 large-scale LNG import terminals in Europe (including non-EU Turkey). The current LNG receiving countries in Europe are Belgium (1 terminal), France (4 terminals), Greece (1 terminal), Italy (3 terminals), Lithuania (1 terminal), Malta (1 terminal), the Netherlands (1 terminal), Poland (1 terminal), Portugal (1 terminal), Spain (7 terminals), Turkey (4 terminals) and the UK (3 terminals). Collectively, their overall LNG capacity is significant –by the end of 2018 total regasification capacity in Europe’s 28 large-scale LNG terminals was 227 billion cubic metres (of gas) (bcm), which is sufficient to cover approximately 40% of Europe’s gas demand.
Planned LNG Terminals in Europe
There are currently in the region of 22 large-scale LNG import terminals being considered or planned in Europe, all of which would be located within the EU, except the planned terminals in Ukraine (Odessa FSRU LNG), Russia (Kaliningrad LNG), Albania (Eagle LNG) and Turkey (FSRU Iskenderun and FSRU Gulf of Saros).
Many of these planned import terminals are in countries with existing regasification capacity, including Greece (where one additional import terminal is planned – Alexandroupolis), Italy (which is planning two additional terminals in Sicily and Calabria), Poland (FSRU Polish Baltic Sea Coast), Turkey (two FSRUs) and the UK (which is planning the Port Meridian FSRU LNG project, and Trafigura Teesside LNG which was previously operated by Excelerate Energy but decommissioned in 2015).
Thirteen of the planned terminals will represent the first large-scale LNG import terminal for the host country: Albania (Eagle LNG), Croatia (Krk Island), Cyprus (Vassiliko FSRU), Estonia (Muuga (Tallinn) LNG and Padalski LNG), Germany (Brunsbüttel LNG and Wilmshaven LNG), Ireland (Shannon LNG and Cork LNG), Latvia (Riga LNG), Romania (Constanta LNG), Russia (Kaliningrad LNG) and Ukraine (Odessa).
Ten of the planned terminals are FSRUs in: Albania, Croatia, Cyprus, Germany (Wilmshaven), Greece, Ireland, Poland, Russia, Ukraine and the UK. In addition, there are numerous plans for expansion of existing terminals or terminals currently under construction, including in Belgium, France, Greece, Italy, the Netherlands, Poland, Spain, Turkey and the UK.
This section highlights some of the recent activities in individual European LNG importing countries, without being exhaustive:
The final investment decision on the 2.6 bcm FSRU LNG terminal on Krk Island was taken in January 2019, despite a lack of substantial market demand from the open season procedure to underpin the project. The investment costs for the terminal are being met by: (i) an equity injection of €32.2 million from the LNG terminal company shareholders – LNG Croatia d.o.o (owned by the Croatian state owned oil and gas company) and Plinacro d.o.o (the Croatian transmission system operator (TSO)); (ii) a €108 million grant from the EU’s Connecting Europe Facility (CEF); and (iii) €100 million from the Croatian State Budget (which the European Commission approved as being compatible with EU State aid rules).
The EU Commission’s support for the Krk Island project stems from its ability to get gas into Central and South-Eastern Europe – areas which have historically been dependent on Russian gas – and as such has been designated as a European PCI since 2013. It will deliver gas into Croatia’s national transmission network which is connected to Slovenia, Italy and Hungary, as well as into other EU countries via non-EU Serbia and Montenegro.
Greece’s only existing LNG terminal at Revithoussa received €50.8 million of EU funding for its expansion project which was completed in November 2018. Facilities to provide large- and small-scale reloading services are under construction at Revithoussa, and the terminal also plans to offer truck loading services by 2022. LNG imports to Revithoussa declined slightly in 2018 compared to 2017. A second terminal – Alexandroupolis FSRU – which is being developed by Gastrade and DEPA, is due to start up in 2021 although FID has been postponed.
Italy has three LNG import terminals. Two of these – the FSRU OLT Toscana Terminal and (onshore) Adriatic LNG – have been running at high levels of utilization in the first half of 2019 (up to 92%). The Italian wholesale gas market has been offering a price premium over NBP and TTF prices, and these two terminals have adopted innovative capacity allocation procedures based on auctions starting from a reserve price lower than previous tariffs and linked to LNG market prices. Historically, LNG spot volumes have been deterred from unloading in Italy due to relatively high regasification tariffs.
The Independence (Klaipeda) FSRU project received €27.4 million of EU funding for connecting pipelines (from CEF). The terminal continues to play an important geo-political role by reducing Eastern Europe’s dependence on gas from Russia since first imports in 2014. The Independence FSRU is currently leased by Klaipedos Nafta from Norway’s Höegh LNG until 2024. In December 2018, Lithuania gave the go ahead to state-owned Klaipedos Nafta to purchase an LNG storage vessel by late 2024 with the aim of reducing annual lease and operational costs. In 2018 Klaipedos Nafta launched a €27 million LNG reloading station to pump the gas into LNG-powered vessels and onto road-going trucks. LNG imports into
Poland’s 5 bcm/y Swinoujscie terminal has received €332 million of EU funding – €130 million from EEPR and €202 million from the European Regional Development Fund – showing the EU Commission’s commitment to diversifying sources of energy supply in Eastern Europe and to reducing the region’s dependency on Russian gas. It is currently executing the Terminal Expansion Program that consists of: (1) additional regasification capacity; (2) a third storage tank; (3) LNG to rail trans-shipment facilities; and (4) a second jetty. In 2018, LNG imports to Poland (from Qatar, Norway and the US) increased by nearly 1 bcm (+58%) compared to 2017, reaching over 2.7 bcm (after regasification), and the terminal had one of the highest utilisation rates in Europe. In March 2019, the Swinoujscie terminal performed its first bunkering operation.
Turkey has four LNG import terminals: two onshore terminals (Aliaga (Etki) and Dortyol) and two FSRUs (Aliaga (Izmir) and Marmara Ereglisi). In 2018, Turkey imported 8.3 MMt of LNG – an increase of 1 MMt compared to 2017 – retaining the position it acquired in 2017 as Europe’s second largest LNG importer (behind Spain).
Based on: https://www.natlawreview.com by Ryan Pereira, Gaffney, Cline & AssociatesKEEP READING
With Russia’s Nord Stream 2 pipeline nearing completion and amidst fears that Ukraine will not strike a new gas deal with Russian energy giant Gazprom, Poland and the United States have agreed to support Ukraine’s energy security by increasing energy transfer capacities and delivering up to six billion cubic metres of LNG from 2021.
Speaking at a panel discussion on the future of energy in at the Krynica Economic Forum in Poland on September 4, Polish government representative for energy Piotr Naimski said that an upgraded interconnector at the Polish-Ukrainian border, as well as the Baltic Pipe, which will be completed in 2022, will make Poland ready to transfer US-imported LNG to Ukraine.
“It’s just a matter of time before LNG producers, particularly the US, will develop in such an extent that this form of raw material supply will be competitive with natural gas,” he told the audience.
Discussing the prospects for the liquified natural gas market, Rutger Huijgens, BP’s director for European government affairs noted that energy supplies were becoming more indigenous while imports were increasing. “As a consequence, there will be an increase in countries supplying LNG to the EU: Azerbaijan through the Southern Gas Corridor; Egypt has recently started exporting LNG and we also see developments in Senegal – overall there is an increase which will greatly help with the diversification and security of energy in Europe,” he said.
The US is poised to be the biggest LNG provider over the next five years, with an annual export volume of 500 billion cubic metres.
“In EU terms, every ninth cubic metre of gas is coming through LNG [and] this will at least double by 2030,” Szabolcs Ferenczi, chairman and CEO of Hungary’s natural gas transmission company FGSZ added, stressing that “this is clearly a market that is opening up.”
For Hungary, however, this might not be the case since being a landlocked country poses obstacles for LNG imports.
Attila Nyikos, the vice president of the Hungarian Energy and Utility Regulatory Authority believes that the optimal outcome for the Hungarian energy mix would be a combination of three sources: Hungary’s own natural gas reserves, Russian gas imports and non-Russian imports. “This can be LNG,” he said, adding that he would maximise domestic production and keep Russian imports “at a healthy level.”
Piotr Woźniak, the president of Polish national gas company PGNiG noted that LNG will occupy at least 30 per cent of the world’s gas market by 2030 since “regasification is not fully utilised” at this point. “We don’t need three sources, only two,” he told Mr Nyikos, noting that Russian gas is extremely expensive in Poland while US-imported LNG is 20-30 per cent cheaper.
According to Mr Huijgens, there is a lot of room to grow imports since LNG terminal utilisation capability is currently at just 31 per cent in Europe. “The real questions is: are all the interconnectors in place to ensure consumption?” he continued, pointing to a major Central and Eastern European challenge.
“The infrastructure in CEE is still missing,” Mr Ferenczi said, adding that Romanian gas production on the Black Sea was more promising from this viewpoint as it could have covered half of Hungary’s consumption. However, this will not happen anytime soon: in August, US energy giant ExxonMobil announced that it was pulling out of the Romanian offshore gas project.
Mr Naimski noted that the infrastructure issue cannot be resolved at a pan-EU level since the barrier is between two isolated systems under the control of either Germany or Russia. “When we talk about Central Europe, the infrastructure possibilities are there, but they need to be extended,” he said, adding that there will be a possibility for Poland to transfer gas from the Baltic Sea to Slovakia and Hungary by 2021.
Donatas Jasas, a board member of the National Energy Regulatory Council of Lithuania, added that the Baltic States can expect similar opportunities via the Baltic Pipe’s Polish-Lithuanian interconnector.
By Dominik Istrate www.emerging-europe.comKEEP READING
Mr. Varró will be one of the speakers of Budapest LNG Summit. He talks about the role of gas in the energy transition, about the growing LNG market and about the challenges of the CEE region.
How important is the role of the natural gas in the energy transition?
Natural gas has a crucially important role in the coming decades. The most important source of global gas demand growth is industrial energy use where gas is very difficult to substitute. In the electricity sector modern gas turbines combine flexibility, efficiency and low local air pollution emissions. They are one of the major sources of the power system flexibility that the integration of rapidly growing wind and solar production requires. Last but not least in both Europe, North America and increasingly in China as well gas plays a major role in building heating, benefiting from a multibillion usd existing infrastructure. In the IEA Sustainable Development Scenario which describes the well below 2 degrees climate stabilization global gas demand does not decline meaningfully before 2040 despite the most stringent climate policy measures.
Of course the energy transition creates challenges as well for gas: the environmental performance of the gas system needs to improve especially with respect to methane leakage from the infrastructure. Gas is not the only solution to provide flexibility for renewables: batteries, parking electric cars and smart demand response solutions will also play an increasing role. Maintaining dispatchable, flexible generation and an infrastructure of pipelines and storage facilities have major advantages: there is an increasing interest in decarbonizing gas by biomethane, hydrogen and the application of carbon capture, utilization and storage. While these solutions require both innovation and investment, they will be necessary to ensure a long term sustainability of gas infrastructure.
The LNG market is rapidly growing, what are the main drivers globally and in Europe?
The most important demand driver has been the Asia Pacific region especially China. In Asia domestic gas production is insufficient to keep up with demand growth Asia requires a major new import project in every 6 months. Russia and Central Asia can and will export pipeline gas to China, but some of the most exciting gas resources including North American shale, Qatar and East Africa can be transported to the importers only in the form of LNG, all of the above regions are in the process of implementing large scale new investments into LNG export facilities. While Russia is a traditional pipeline exporter, Russian energy policy recognized the importance of LNG and Russia is also emerging as a major LNG competitor.
In Europe Russian pipeline supply is and likely to remain the largest single source. Nevertheless, expanding LNG supply has played a major role in replacing depleting European production, diversifying supplies and keeping prices down due to enhanced completion. Europe is the swing demand in global LNG markets. In periods of market tightness like after the post Fukushima replacement of nuclear with LNG in Japan Europe imported less, enabling a flexible market response. On the other hand in the past year abundant LNG supply and lower prices led to expanded European LNG imports and gas use especially in the power sector.
What about the CEE/SEE region? LNG can become a relevant new source?
A key initiative of the European Union is the Energy Union, a vision of a well interconnected, single market integrated market for gas in which LNG entering into any European port will affect the competitive conditions in the entire continent. This requires adequate physical infrastructure which is able to deliver supplies across countries and good regulation that enables the transparent and market based utilization of the infrastructure. In Central Europe, especially in Hungary major progress has been made in both: new interconnections were built, reverse flow possibilities were established, market efficiency and transparency improved. Competitive conditions in the main Western European markets that are driven by LNG now influence Hungarian or Central European market conditions to a much bigger extent than previously thought possible. However, the establishment of a genuine single market is still an unfinished journey. There are still physical infrastructure gaps, notably there is no access to LNG between Northern Italy and Greece, a gap to be addressed by the Croatia LNG terminal. In some borders interconnection capacity needs to be expanded or established, and reverse flow services will need to be provided. Last but not least some Central European countries still have non-market based and often less than perfectly transparent regulatory measures in infrastructure utilization which needs to be improved for an efficient market. If those physical infrastructure and regulatory reform initiatives are implemented, the region could became one of the major beneficiaries from the global expansion of LNG supply and intensifying competition in LNG markets.KEEP READING