The EU has backed new LNG import terminals as part of its energy security strategy
Despite substantial excess LNG import capacity, Europe is investing in new LNG terminals as it looks to phase out coal-fired plants and nuclear power in favour of renewable energy and gas. Germany, Europe’s largest gas importer, has shifted its policy and plans to import LNG directly, diversifying its energy sources and strengthening its energy security.
Underpinning Germany’s need for additional natural gas sources are its plans to shut all of the country’s coal-fired power plants by 2038. This aligns with Germany’s policies of ‘greener’ power, outlined in its Renewable Energy Sources Act and Europe’s stated goals of being carbon neutral by 2050. The German Federal Ministry for Economic Affairs and Energy says the country’s electricity supply is becoming greener every year. The share of renewables in electricity consumption has steadily grown over the last few years – from around 6% in 2000 to around 36% in 2017. By 2025, 40-45% of electricity consumed in Germany will be generated by renewables. Natural gas and LNG, too, will have a role to play in the energy mix.
In May, Germany’s cabinet approved a plan that would make it easier for companies to invest in LNG import terminals to support energy security and diversify the country’s sources of natural gas. In a statement, German Federal Ministry for Economic Affairs and Energy minister Peter Altmaier said it was important for Germany to “use as many supply routes and sources as possible” for its gas. Minister Altmaier added that the idea behind the legislation was to remove obstacles to “private sector investments in the construction of LNG import terminals” and strengthen competition among gas imports.
Three sites for LNG import terminals have been proposed. Two are on the Elbe River, one in Brunsbuettel supported by RWE AG and another in Stade, proposed by LNG Stade GmbH. A third on the North Sea coast in Wilhelmshaven is backed by Uniper SE. The Brunsbuettal LNG terminal would have storage capacity of 240,000 m3, a jetty for vessels and barges of up to 265,000 m3 capacity and a regasification capacity of 3.6 mta.
In December, Dusseldorf-based Uniper and Japan’s Mitsui OSK Lines, Ltd (MOL) plan to use a floating storage and regasification unit (FSRU) at the deep-water port of Wilhelmshaven. The FSRU has a planned send-out capacity of 10Bn m3 per year with a storage capacity of 263,000 m³. The facility could be in operation as early as H2 2022. Wilhelmshaven is closely located to an existing pipeline and gas storage infrastructure. MOL intends to own, operate and finance the FSRU. Uniper supported the development of OLT Offshore LNG Toscana’s FSRU Toscana, the regas import terminal operating in the Mediterranean offshore Italy. The FSRU has a regasification capacity of 3.75Bn m3 per year and a storage capacity of 137,500 m³ of LNG.
Backing new LNG import terminal
There are 24 existing large-scale LNG import terminals in the EU, with an excess LNG import capacity of 150Bn m3. Still, the EU is providing financing for new import terminals, supporting projects worth over €656M (US$725M). There are eight new EU-backed LNG import terminal projects in Croatia, Greece, Ireland, Poland and Spain, which will increase capacity by another 22Bn m3 by 2023.
The International Energy Agency (IEA) expects LNG imports to Europe to increase by almost 20% by 2040 as compared with 2016 levels. Last year, LNG imports to Europe reached 48.9M tonnes, up 2.9M tonnes or 6.4% in 2018, according to the International Group of Liquefied Natural Gas Importers (GIIGNL).
LNG cargoes from the US are expected to meet part of Europe’s demands, as the second wave of US export terminals comes on line. The US currently has 39Bn m3 of liquefaction capacity and is foreseen to add a further 80Bn m3 by 2023.
New FSRU terminal in Croatia
In August, the European Commission (EC) approved plans for a new floating LNG import terminal on Krk island in Croatia, in a move to enhance energy security. Using an FSRU and connections to the national gas transmission network, the LNG import terminal will transport up to 2.6Bn m3 per year of natural gas into Croatia starting in 2021.
Terminal operator LNG Croatia is owned by Croatian state-owned electricity and gas utility Hrvatska Elektroprivreda, which has an 85% stake, and Croatia national gas transmission system operator Plinacro, which controls the remaining 15% interest.
Golar won a bid in November 2018 to convert 2005-built LNG carrier Golar Viking to an FSRU vessel at a cost of €159.6M (US$177M). The FSRU will be delivered by Chinese shipbuilder Hudong-Zhonghua in October 2020 to Krk island. The terminal’s construction is expected to cost €233.6M (US$259M), with financing of €32.2M (US$36M) from LNG Croatia’s shareholders, €101.4M (US$113M) from EC’s Connecting Europe Facility and €100M (US$111M) from the Croatian Government. Additionally, Croatia will grant a tariff compensation called a ‘security of supply fee’, which is financed by fees charged by the gas transmission system operator to gas users along with gas transmission tariffs, in case revenues from the terminal fees are not sufficient to cover operating expenses.
On the list of ‘European Projects of Common Interest’ since 2013, the terminal will help lessen Europe’s dependence on natural gas from Russia. The LNG terminal will deliver gas to the Croatian national transmission network, connected with Slovenia, Italy and Hungary, and with other EU countries via non-EU member states such as Serbia and Montenegro.
Cyprus import terminal
Lithuania’s AB Klaipedos nafta, with the consortium partners South Korea’s Samsung C&T and Posco E&C and Japan’s MOL and Osaka Gas have submitted a binding bid proposal for development of the Cyprus LNG import terminal.
DEFA, the Natural Gas Public Company of Cyprus, announced an international tender for the project in October 2018. Specifications for the LNG terminal call for the use of an FSRU, a jetty for mooring and a jetty-borne gas pipeline to secure supply of natural gas to the largest Vasilikos Power Plant in Cyprus. With an estimated cost of €500M (US$555M), the project has won EU support of €116M (US$128M).
Plans call for AB Klaipedos nafta along with MOL and Osaka Gas to provide the terminal operator services for a period of up to 20 years.
DEFA should select winners of the tender later this year. Commissioning of the terminal in Cyprus is planned for 2021. With six operating LNG import terminals, Spain has the most of any European country and two others under development. Acciona was awarded an engineering procurement and construction and turnkey ‘lump sum’ contract by Gascan to build both terminals; one is the Grandadilla LNG Terminal in Granadilla, Tenerife and the other is Gran Canaria Terminal in Las Palmas, Gran Canaria. Both facilities will have identical LNG storage capacities of 150,000 m³, with berths able to accommodate LNG carriers up to 145,000 m3 capacity.
Expanding Poland LNG
Poland is also set to increase the capacity of the Świnoujście LNG import terminal by 50%, following an agreement in April between Polskie LNG and the EU on US$143M in financing. Regasification capacity at the terminal will grow from 5Bn m3 of gas to 7.5Bn m3 once the project is completed. Future terminal expansion plans will add a second jetty for loading/unloading LNG carriers, LNG transshipment and LNG bunkering services.
The move by Polski LNG (PLNG), a subsidiary of Gaz-System, is part of an effort by Poland and Central European states to lessen their dependence on Russian gas. Polish government advisor for strategic energy infrastructure Piotr Naimski points out that the expansion of the Świnoujście LNG import terminal fits with the EU’s ‘North Gate’ concept, which involves the construction of the Baltic Pipe that would connect gas fields on the Norwegian continental shelf to Poland by October 2022.
The EC signed an agreement with Poland to provide funding of US$239M for the construction of the Baltic Pipe through Denmark. Poland would serve as a hub for the transport of gas to the Czech Republic, Slovakia, Lithuania, Hungary and Ukraine. The pipe would supply about 10Bn ft3 of natural gas per year to Poland.
Poland purchases about two-thirds of the 17Bn ft3 of gas it annually consumes from Russia’s Gazprom.
“It is crucial for the EC to mark the strategic role of our gas port as a tool to ensure the security of gas supplies not only to Poland but also to the Baltic States, through diversification and promotion of new transport routes in the region,” says Poland Minister of Energy Krzysztof Tchórzewski.
Meeting about 40% of Poland’s current natural gas demand, the expansion, says PLNG president Paweł Jakubowski, “will enable us to launch a more competitive offer of services related to regasification and unloading of LNG, for which we have an increasing demand in Poland.”
Polish gas demand is expected to increase to 21Bn m3 in 2023. To meet its increasing demand, Poland plans to purchase Norwegian gas through the Baltic Pipe, produce 4Bn m3 per year domestically and import 7.5Bn m3 per year of LNG through the Swinoujscie LNG terminal.