European Commission will expand LNG use to avoid gas supply disruption

The EU has a major opportunity to improve its energy security and its competitiveness thanks to the positive development of the global LNG market. Ensuring that all Member States have access to liquid gas markets and diversified sources of supply is therefore a key objective of the EU’s Energy Union.

In order to improve the access of all Member States to LNG and storage as an alternative source of gas, the EU needs to:

• build the necessary infrastructure to complete the internal market, allowing all Member States to access international LNG markets, either directly or via other Member States. While in the North-West of Europe markets are competitive and well-connected, with access to several sources of gas – including a number of terminals with substantial capacity to import LNG – gas markets in the Baltic, central-eastern, south-eastern and south-western regions are less developed
• complete the internal gas market so that it sends the right price signals — to attract LNG to where it is needed and to facilitate necessary infrastructure investments;
• use storage facilities more efficiently. The Commission will improve the operational rules on the cross-border use of storage. It is also important that Member States optimise the use of gas storage across borders by creating regional preventive action and emergency plans.
• work closely with international partners, to promote free, liquid and transparent global LNG markets. This means engaging with current and future suppliers and with other major consuming countries to ensure that LNG can be traded freely on global markets, both under normal market conditions and in the event of external shocks.

LNG already plays a significant role in EU gas supplies, and could become more important over the coming years as the global LNG market grows and EU import dependency rises. The competitiveness of LNG with respect to other sources (and therefore how much LNG actually gets imported to the EU by market participants) will depend on a range of different factors, including for example the cost of liquefaction and transport, currency exchange rates and of course the global LNG supply and demand balance (for example, high demand in Asia can drive prices up elsewhere).

The EU’s overall LNG import capacity is significant – enough to meet around 43% of total current gas demand (2015). However, in the region of south-east of Europe, central-eastern Europe and the Baltic, many countries do not have access to LNG and/or are heavily dependent on a single gas supplier, and would therefore be hardest hit in a supply crisis. It is important to make sure that such countries have access to a regional gas hub with a diverse range of supply sources, including LNG. Based on the list of EU‘projects of common interest‘ the LNG strategy includes a list of key infrastructure projects which are essential for ensuring that all Member States of the EU can benefit from LNG.

With any new infrastructure, commercial viability is very important. For an LNG terminal, its utilisation across a whole region, or the choice of lower cost and more flexible technologies, such as floating storage and regasification units (FSRUs), may considerably improve its viability. In principle, LNG terminals, similarly to other energy infrastructure, should be financed through end-user tariffs (investment is paid for by all gas consumers as part of their monthly gas bill) or in some cases gas companies bear the costs of construction (the investment is borne by a number of companies in exchange for the right to use the terminal through long-term capacity booking). But even with a sound business case, financing may still be a challenge in some cases. For projects that are particularly important for security of supply, EU funds, such as Connecting Europe Facility could potentially help fill the financing gap. EIB loans, including under the European Fund for Strategic Investments, may be another source of long-term financing.

Storage of gas is needed to balance fluctuations in daily and seasonal demand, which vary in line with demand for heating, power generation or industrial use. Storage also plays a major role for securing the supply of gas in case of potential disruptions or particularly high demand (i.e. during a cold spell). The main advantage of stored gas is that it is available close to consumers and can be supplied without delay.

source: http://www.green4sea.com/european-commission-will-expand-lng-use-to-avoid-gas-supply-disruption/