How Much Liquefied Natural Gas will Europe Import in 2011? a report by Andy Flower Contributing Editor for Waterborne Energy
The past two years have seen Europe’s liquefied natural gas (LNG) imports grow by more than 50% largely as a result of cargoes from Qatar delivered to the UK, Belgium, Italy and Turkey. The increase has been at a time when overall natural gas consumption has been flat – declining in 2009 and recovering to around the 2008 level in 2010. As Figure 1 shows, the share of LNG in Europe’s gas supply increased from 7% in 2000 to an estimated 16.5% in 2010. The increased share of LNG has been partly at the expense of indigenous production, which is declining in the UK and other countries, and partly at the expense of Russian exports by pipeline to Europe. Initial data for the first quarter of 2011 show that the increase in LNG imports is continuing. However, the outlook may change over the course of the rest of the year because of the increase in imports into Japan to compensate for the loss of nuclear power caused by the catastrophic earthquake and tsunami on 11 March.
Liquefied Natural Gas in Europe in 2010
The international trade in LNG commenced in 1964 with its export from Algeria to the UK. The discovery of North Sea gas the following year resulted in the UK becoming self-sufficient in natural gas and LNG imports ceased in the 1980s. The Canvey Island terminal, east of London, which had been built to receive the LNG was converted into a liquefied petroleum gas terminal in the 1990s. However, Europe’s LNG imports grew steadily as France, Spain, Italy, Belgium, Turkey, Greece and Portugal became importers and in 2005, the UK, which had seen indigenous production start to decline, re-emerged as an importer with the commissioning of a new receiving terminal on the Isle of Grain. In 2010, Europe imported 65.5 million tonnes (mt) of LNG – 88.4 billion cubic metres (bcm). Table 1 shows LNG imports by country in 2008, 2009 and 2010.
Spain was Europe’s largest LNG importer in 2010, accounting for 31% of the total. However, Spanish imports fell in 2009 because of the impact of the recession. The UK became Europe’s second largest importer in 2010, accounting for more than 50% of the total increase in Europe’s imports between 2008 and 2010. Waterborne LNG data shows that in the first quarter of 2011, the UK overtook Spain to
Andy Flower has been working as an independent consultant for the past 10 years, specialising in the liquefied natural gas (LNG) business where his areas of expertise include strategy, marketing, project structures, shipping, pricing, supply and demand and project economics. He retired from BP in 2001 after 32 years of service, including 22 years working in the company’s LNG and natural gas business units. He is a contributing editor for Waterborne LNG and has contributed to
several books on natural gas and LNG including Natural Gas in the Middle and North Africa, which was published by the Oxford University Press in March 2011.
E:
andy.flower@virgin.net
become Europe’s largest importer and the world’s third largest after Japan and Korea.
The increase in the UK’s imports has come mainly from Qatar, where the main destination is the South Hook terminal in south-west Wales, which is wholly owned by participants in the Qatargas LNG plant. Qatar overtook Algeria, the mainstay of European LNG imports since 1964, to become the continent’s largest LNG supplier (see Figure 2) in 2010, accounting for 41% of the total imports. Qatar is Italy’s main source of LNG following the start-up of the Adriatic LNG terminal in August 2009 and it is also an important supplier to both Spain and Turkey.
Europe’s Liquefied Natural Gas Import Infrastructure At the end of 2010, Europe had 20 LNG-receiving terminals in operation with a total nameplate capacity of around 125mtpa (170bcma), nearly double the level of imports in 2010. Twelve of the terminals have been brought into service since 2000. Europe currently has four terminals under construction: in northern Spain (El Musel); north-west Italy (Livorno); the Netherlands (Rotterdam); and western Poland (Swinoujscie). They will add a further 20mtpa (27.2bcma) to import capacity by 2014. The first of these terminals, the Gate terminal in Rotterdam is on schedule to receive its first cargo in June 2011 and start commercial operations at the end of September. It will add 8.9mtpa (12bcma) to European import capacity. However, the holders of long-term capacity at the terminal (the Danish company DONG, the German companies RWE and Ruhrgas, the Dutch company Eneco and the Austrian company OMV) have only one long- term contract in place, a 0.7mtpa (1bcma) contract between DONG and the Spanish company, Iberdrola.
There are a large number of new receiving terminals at the planning stage in Europe as governments and companies in many countries want access to LNG to increase the security of natural gas supply. However, progress has generally been slow in moving these projects to a final investment decision. A challenge that many are facing is finding users prepared to commit to the use of the capacity or suppliers willing to contract to supply LNG on a long-term basis. The only new long-term contract signed for the supply of LNG to Europe in recent years is the 1mtpa (1.35bcma) contract between Poland and Qatar, which was finalised in mid-2009.
European Liquefied Natural Gas Imports in the First Quarter of 2011
Waterborne LNG’s preliminary estimates of European LNG imports in the first quarter of 2011 show that the strong growth seen in the past two years has continued with an increase of 17.2% compared with the same quarter in 2010 (see Table 2). Much of the growth was in the UK and Belgium, two countries which receive a major part of their LNG supply from Qatar. Elsewhere in Europe the outcome has been mixed, with France, Greece and Portugal registering increases of 20 to 25%,
62 © TOUCH BRIEFINGS 2011
LNG
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