The European natural gas market has been in crisis this winter, with prices skyrocketing north of $100/MMBtu recently. Tight supplies, low storage levels, and a new gas-supply-security issue sparked by the war in Ukraine has many European nations, especially Germany, embarking on a crash course to increase supplies and diversify away from Russian gas imports. In this quest, increasing gas supplies in both the short- and long-term is a top priority and will require substantially more LNG capacity to replace — and eliminate the need for — Russian gas. With Europe’s gas-supply urgency on the rise, long-dormant prospects for exporting LNG from Canada’s East Coast are being re-examined. In today’s RBN blog, we look at the potential for repurposing the region’s only LNG import terminal into one that is geared toward exports.
With Europe importing as much as 40% of its natural gas from Russia, the recent collapse in Europe’s economic and energy relationship with Russia over the war in Ukraine has forced Europe to rethink its sources of gas supply. With the goal of quickly reducing its dependency on Russian gas — and with Europe’s domestic natural gas production in a slow, steady decline over the past decade — the continent has quickly shifted gears toward increased imports of LNG as a means of achieving that goal. Earlier this month, we gave readers a sense of what might be involved in You Don’t Own Me.
Although Europe has been importing LNG for many years, the surge in European natural gas prices this winter due to extremely tight supplies and the perception that Russia was deliberately withholding gas deliveries created havoc in the global LNG market. As a result, many cargoes from the U.S. and other LNG-exporting nations were diverted from lower-priced destinations in Asia to import terminals in Europe, as we discussed in Upside Down. However, it quickly became abundantly clear that a larger, longer-term fix would be needed to secure more LNG if future global price surges were to be avoided or minimized.
To this point, the German government announced in late February that it was rapidly pursuing the development of up to three new LNG import terminals along its North Sea coastline to diversify away from Russian gas, which accounts for 60% of Germany’s gas consumption, and ensure that gas acts as a bridge fuel during the energy transition to renewable fuels. Not wasting any time, a memorandum of understanding was signed March 6 between a German state bank and a Dutch gas utility for the construction of at least one terminal near Brunsbüttel, on the North Sea near Hamburg, with hopes that the facility can begin importing LNG as early as 2024.
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