CEEP REPORT (Q1): LNG’s role in gas supplies diversification in Central Europe

In the first report for 2019, CEEP focuses on the emergence of a global LNG market and the increasing possibility of LNG import to the EU. The choice of this topic precedes the 1st EU-US High-Level Business to Business Energy Forum “Towards large-scale U.S. LNG exports to the EU’s gas market: competitive pricing, infrastructure investments and technological innovation,” whichwill take place in Brussels, on 2nd May.

In order to cover at best this complex topic, the publication includes articles from the industry perspective, regulatory bodies (the European Commission) as well as market outlooks and expert views.

In the opening statement, the Director General of DG Energy, European Commission, Dominique Ristori, emphasizes the role of LNG for the improvement of security of supply and decarbonization. Mr. Ristori points out that the share of LNG in total EU gas imports increased from 10% in 2014 to 14% in 2018, reaching around 56 bcm.

The president of the association LNG Allies, Fred. F Hutchison, provides an overview of the increasing importance of the U.S. as an exporter of natural gas due to the “shale revolution”.
He also elaborates on the increase of the U.S. liquefaction capacity, a key development for the global LNG market.

The importers’ perspective is presented by Nemunas Biknius from Lithuanian’s EPSO-G and Arūnas Molis, Klaipedos Nafta. They refer to the importance of the LNG for breaking the monopoly of Gazprom in the Baltic States. Furthermore, they underline the importance of the development of gas interconnections for strengthening the security of supply of the region.

Dr. Anna Mikulska, Ph.D. focuses on the gas diversification strategy of Poland, prompted by security considerations and high prices for Russian gas. Similarly, PGNiG envisages to fully cut supplies from the East and offset it with LNG imports of up to 8 bcm per year until 2023.

In the same vein, Polskie LNG writes about the functioning of LNG terminal in Swinoujscie, with the highest utilization rate in the EU. More, the terminal’s regasification capacity will reach 7.5 bcm.

Similarly, Grupa LOTOS envisages an increased role for LNG for maritime ships bunkering in the Baltic Sea basin. In 2018, only two such operations have taken place, but due to the stricter environmental standards, the use of LNG for shipping will be growing constantly.

The Transatlantic perspective is also presented by two scholars Frank Umbach Ph.D. and Thierry Bros Ph.D. The former states that in the coming years, LNG will be the main competitor for Russian gas in the EU. He also predicts that the EU will emerge as the biggest importer of LNG. The latter notices that the increase in the spare liquefaction capacities in the U.S. will inevitably reduce the price of LNG.

The Director of Romania Energy Center, Eugenia Gusilov, assesses the chances of the first Black Sea LNG terminal development. She points out that such possibility is very limited because of the market limitation and possible delays in exploitation of Romanian offshore gas deposits. 

Researchers from REKK, think tank, Péter Kotek and Borbála Takácsné Tóth, present the results of modelling-based analysis of the correlation of the European gas demand and the LNG supply to Europe. They conclude that the role of LNG is crucial: it serves as a competing source for incumbent players and induces price competition.