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LNG Only Fills Niches in Europe

Maritime Activity Reports, Inc.

February 28, 2019

Although LNG (Liquid Natural Gas) provides a solid supplement to European gas supplies, the EU is and will remain a pipeline market – for good reasons, said Wintershall's new position paper.

The report from Germany's largest crude oil and natural gas producer on the importance of liquid gas for Europe said that the liquefaction is highly energy-intensive – the energy consumption corresponds to about 13% of the gas transported.

With an energy loss of less than five percent, pipelines are much more energy-efficient. Another argument for pipeline gas lay in its lower costs. Russian pipeline gas, for example, is more competitive and less expensive than LNG from the USA.

Since the EU's own gas production is declining, Wintershall welcomes any additional import route. However, LNG terminals shall make economic sense. They should not be politically enforced or "inflated" by subsidies – at the taxpayers' expense.

The EU is fortunate to have two of the leading gas producers within pipeline distance: Russia and Norway alone supply over 60% of the EU's natural gas. LNG, on the other hand, contributes only about 16%. Existing LNG terminals in the EU have been operating at less than 30% capacity in recent years.

Moreover, Europe has so far only been a residual market for LNG. This was demonstrated, for example, by the cold snap in February 2018: Even then, LNG continued to go to Asia because higher prices were paid there. It was Russian pipelines that secured supplies in Europe.

Nevertheless liquid natural gas is not only an option for the heating market, but also for the transport sector – an exciting option for Europe. Particularly for maritime shipping and heavy goods traffic, since it could replace heavy oil and diesel. LNG thus can help to protect the climate.