Europe’s efforts to fill its energy gaps

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Sanctions on Russia and a Covid lockdown in China have reduced freight volumes at Rotterdam, Europe’s busiest seaport. But one cargo is booming: liquefied natural gas.

Importing more LNG is a priority as the EU tries to reduce its dependence on gas supplied by Russia, with the intention of depriving Moscow of funds for its war in Ukraine. But the LNG terminal in Rotterdam is full. Expansion work is underway but will not be quick.

“LNG is a challenge. It will provide us with the most restrictions of all the goods we import,” said port general manager Allard Castelein. “You can’t build a [LNG] tank overnight.

Meanwhile, at 1,500km, Spain has a different capacity problem. The country has more than enough LNG terminals: one has even been mothballed. What’s missing are enough pipelines to get the gas to the markets that need it in central Europe. A project to build another link to France, the Midcat pipeline, has been stalled for years.

Spain accounts for a large part of the EU’s LNG import capacity, with six import terminals in operation. But getting gas to Europe is difficult with just two pipelines across the Pyrenees to France, capable of handling barely a tenth of LNG import capacity. Regulators rejected another pipeline, known as Midcat, in 2019 as too expensive. Madrid have renewed calls for its construction.

“Spain would like to import and contribute to the security of Europe. . . We would like to send gas to Romania, but how can we do it if it does not even arrive in Perpignan [on the French side of the border]said Gonzalo Escribano, director of the energy and climate change program at the Royal Elcano Institute in Madrid. [fewer] gas links with France than with Algeria.

Across Europe, examples abound of similar pinch points and infrastructure gaps, betraying the problems the continent faces as it struggles to reduce its dependence on Russia, which provides 40 % of EU gas needs.

Many exist because for decades the EU relied on Russian gas flowing from east to west, while private energy providers had little incentive to create excess capacity. Today, more attention is being paid to how to secure LNG from places like the United States and move energy west to east and to landlocked states in the center and east. is.

Create more LNG capacity in Germany and Italy

More regasification capacity in Germany and Italy map

Germany does not have LNG terminals and yet is one of the countries most dependent on Russian gas. It would also be a natural gateway for other landlocked European countries to obtain LNG. Germany has leased four vessels to regasify LNG, some of which are expected to be operational by the end of the year, before conventional onshore facilities are completed in 2025 and 2026.

On Wednesday, the European Commission will unveil a €195 billion plan to deliver remedies, emphasizing the need for more renewables, lower consumption and reliable alternative suppliers. But the plan will also mark an attempt by Brussels to bring together EU energy infrastructure more cohesively, removing bottlenecks and ending delays to projects such as the Midcat pipeline.

“If we had made these interconnections when they were agreed [with France in 2014 and subsequently]Europe today would not be in this situation of dependence [on Russia]Portuguese Prime Minister António Costa said when meeting with his Italian, Spanish and Greek counterparts in Rome in March.

Deficiencies in physical infrastructure make some EU member states very vulnerable to the end of Russian supplies. Concerns in Hungary, whose oil comes entirely from Russia and which complains it has few alternatives, are stalling EU attempts to gradually introduce an embargo on all Russian crude.

Gas addiction is just as painful. LNG import terminals in Rotterdam, Zeebrugge and Dunkirk are almost at capacity and gas flows from France to Germany and the Benelux countries are constrained.

“In case of absence of Russian gas, Western countries cannot supply additional gas to Eastern European countries because capacities in this direction are limited,” said the European Network of Transmission System Operators. gas in a recent report.

Modify pipelines to flow in the opposite direction to the east

Changed the gas pipelines to run in the opposite direction to the east map

Much of Europe’s pipeline network is designed to pump Russian gas from east to west. The EU has tried since 2009 to improve gas infrastructure from west to east, but the European Network of Gas Transmission System Operators says infrastructure limitations in northwestern and southern Europe would prevent the additional flow of gas to Central and Eastern Europe if Russia were to cut off the gas supply.

Another obstacle to gas flows from France to Germany is that the German transmission network does not accept odorized gas, which makes it safer for consumers to detect leaks but can introduce impurities.

Analysts say most projects to remove choke points will take years. Among the fastest options are floating facilities to turn LNG into gas; and adding compressors to existing pipelines so gas can flow in a different direction. In the longer term, better infrastructure to turn Turkey into an LNG hub and bring more Azeri gas and Greek LNG imports to Southeast Europe would help. The same would apply to the construction of storage and interconnections with the United Kingdom.

In Spain, Arturo Gonzalo, managing director of transport company Enagás, said that with accelerated approval, the new Midcat gas pipeline could be completed in 30 months and would cost no more than 600 million euros for a pipe to transport hydrogen and natural gas.

“We are developing technical work with our French equivalent so that, if [both] governments decide, we can start as soon as possible,” he said.

Jonathan Stern, a researcher at the Oxford Institute for Energy Studies, said many of the projects under review had been planned for years but dismissed as not commercially viable when assessed against good Russian gas supplies. market. This assessment has now changed.

“There has been a revolution in the way governments think about infrastructure. Competition and free markets lose out when energy security is a priority,” said Massimo Di Odoardo, vice president of global gas and LNG research at Wood Mackenzie.

Improvements in the “southern gas corridor”

Southern Gas Corridor Map Improvements

Improvements here would help bring more gas from Azerbaijan and LNG imports from Turkey to Southeast Europe. The Greece-Bulgaria interconnector should come into service from October, which would help Bulgaria to do without Russian gas.

Legacy pipelines to transport Russian gas from Bulgaria to Turkey exist, and these could be reversed with an agreement between the two countries.

A floating LNG terminal in Alexandroupolis, northern Greece, is expected to be operational by the end of 2023 to connect to TAP and supply gas to Bulgaria and other countries.

Brussels has relaxed state aid rules to allow governments to help fund projects that will connect countries and it is also ready to invest part of the EU budget in projects.

Marco Alverà, an energy entrepreneur and former chief executive of Italy’s gas network operator Snam, said the cost of the infrastructure needed seemed low compared to what the region has paid for energy over the past six months. winter months due to rising prices.

“Who should pay for it is not an issue when you put it in the context of how much you pay for energy,” he said.

Making better use of capacity in the UK

The role of the UK - pipelines and LNG

The UK can act as a bridge to bring LNG supplies to Europe. However, insufficient pipeline capacity and gas storage in the UK prevent supplies from the Milford Haven import terminals from reaching mainland Europe. The transit bottleneck was exacerbated by the 2017 closure of the Rough storage terminal in the North Sea.

Some criticize the rush to build infrastructure in Europe. “We should stop and do an analysis – what infrastructure do we have? what can be used more and improved? — instead of going crazy building, building and building,” said Ana Maria Jaller-Makarewicz, an analyst at the Institute for Energy Economics and Financial Analysis. “There is a lack of planning as a whole continent.”

There are also questions about whether investing in infrastructure to move oil and gas more easily across Europe is compatible with the EU’s determination to decarbonise the economy. The EU plans to call for a short-term peak in gas followed by a long-term decline as it seeks to reach net zero carbon emissions by 2050.

Simone Tagliapietra, senior researcher at Brussels-based think tank Bruegel, said private investors don’t want to invest in “stranded assets” that could be redundant almost as soon as they’re built.

“It is impossible to replace all Russian gas molecules with others. In the event of a complete Russian shutdown, countries would be forced to ration gas for certain industries,” he said.

Even as Port of Rotterdam chief executive Castelein tries to find ways to import more LNG, he also envisions a different energy future for the EU – pointing to plans for electrolyser farms to produce power plants. hydrogen and biofuels to replace coal yards and oil refineries.

“Fifty percent of our throughput is based on fossil fuels,” Castelein said. “The transition we have to go through is unprecedented.”

Graphics by Liz Faunce. Additional reporting by Peter Wise in Lisbon

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