Sanctions drowned in gas: European LNG market in symbiosis with Russia and the US
By Marek Grzybowski
The European Union remains the world’s largest LNG importer. In the first half of 2024, the European Union imported 45.4 million tons of LNG. Although LNG imports dropped by 12.2% year-on-year, it still accounts for 22% of the global LNG market on the demand side. For comparison, in the January-December 2023 period, LNG imports from European Union countries increased by 1.9% year-on-year to 102 million tons, to China by 11.4% year-on-year to 71.6 million tons, to Japan by 9.2% year-on-year to 66.9 million tons, to South Korea by 3.5% year-on-year to 45.5 million tons – reports Banchero Costa Research in its latest report.
By pumping Russian LNG and crude oil in terminals in Belgium, Spain and France, the EU pumps over USD 1 billion into the Russian economy every month. – the latest CREA report states.
In September 2024, Russia’s monthly export revenue from fossil fuels fell by 2% to EUR 618 million per day. This is the sixth consecutive month of decline. And yet, Russia’s LNG export revenue increased by 4% month-on-month to EUR 42 million per day. Russia saw a small 1% increase in pipeline gas revenue month-on-month to EUR 78 million per day.
Global LNG trade by sea continued to grow last year, also helped by events in Ukraine that forced Europe to diversify its gas supplies and replace imports from Russian pipelines. However, there was some slowdown in LNG trade compared to previous years. In the 12 months of 2023, global LNG supplies increased by 1.7% year-on-year to 409.9 million tonnes, based on LSEG ship tracking data.
The changes in LNG demand in 2023 and 2024 took place after a dynamic increase in LNG supply volumes in 2022 by 4.7% y/y and an increase of 7.3% y/y in 2021. In the period January-June 2024, the positive trend continued, and deliveries by LNG tankers increased to 206.0 million tonnes and were higher by 1.3% y/y, when 203.3 million tonnes were reached in the first half of 2023.
The supply of LNG for transport by ships increased. As a result, 1.7% more liquefied gas was transported by LNG tankers between export and import terminals in the 12 months of 2023 than a year ago. LNG terminals pumped around 409.9 million tonnes from ships to onshore installations last year.
Świnoujście with the gas
For comparison, 62 LNG carriers were received at the terminal in Świnoujście in 2023. They received approximately 4.66 million tons of liquefied gas, which is approximately 6.43 billion m3. This was approximately 0.26 million tons of LNG more, or 0.36 billion m3, compared to 2022 – according to data from PGNiG (ORLEN Group). The last cargo reached the terminal on December 29 based on a long-term agreement with the Qatari partner – QuatarEnergyLNG (formerly Qatargas). The gas carrier “Al Sahla” delivered approximately 90 thousand tons of LNG.
In October 2024, the LNG Terminal in Świnoujście received an LNG carrier with the 49th delivery of liquefied natural gas. Since the beginning of the gas terminal’s operation, 317 deliveries have been received. In the first 3 quarters of 2024, the terminal in Świnoujście imported 44 deliveries with a total volume of approximately 3.18 million tons of LNG (approximately 4.39 billion m3). In the third quarter of 2024 alone, ORLEN (formerly PGNiG) received 17 LNG shipments from the terminal in Świnoujście, with a total volume of approximately 1.20 million tons of LNG (approximately 1.66 billion m3). Since the Lech Kaczyński terminal in Świnoujście began operating, 317 loads of liquefied natural gas have been received there. Over the 5 years of operation, the terminal in Świnoujście has received approximately 20 million tons of liquefied gas ordered by PGNiG, which after regasification corresponds to approximately 27 billion m3 of natural gas. Most of the cargo came from Qatar and the USA. A dozen or so deliveries were from Norway. Poland also imports gas from Nigeria and Trinidad and Tobago. In October 2024, the gas carrier Al Sahla, sailing under the flag of the Marshall Islands, delivered approximately 90 thousand tons of LNG from Qatar.
In the coming years – as further contracts with American LNG exporters are implemented – the number of deliveries from the US to Poland will increase significantly. PGNiG – under agreements with GAZ-SYSTEM – currently reserves the full capacity of the terminal, i.e. approximately 5 billion cubic meters of regasification capacity per year. As it expands, it will have a processing capacity of 6.2 billion cubic meters, and from 2024 – 8.3 billion cubic meters – informs PGNiG.
EU Supply Sources Changes
The EU-27 currently accounts for 22% of global seaborne LNG imports, well ahead of China in second place with 18.9% and Japan with 16.1%. The United States is the largest source of LNG supplies to Europe. However, volumes peaked in 2023 and are now declining. In the first 6 months of 2024, the EU imported 20.9 million tonnes of LNG from the US, down 7.4% year-on-year from 22.6 million tonnes in H1 2023, but still significantly more than the 8.5 million tonnes in H1 2021 or 9.4 million tonnes in H1 2020. The US accounted for 46% of seaborne LNG imports to Europe in H1 2024. Despite the introduction of sanctions on trade with Russia, volumes from Russia did not decline, quite the opposite. In January-June 2024, the EU imported 8.8 million tonnes of LNG from Russia, up 14.8% year-on-year compared to 7.7 million in H1 2023. Most of the volumes (8.1 million tonnes in H1 2024) came from the Sebetta seaport (Yamal LNG). In January-June 2023, Russia accounted for 19.4% of EU LNG imports. Qatar currently ranks third among the largest suppliers to the EU, with a 10.7% share, exporting 4.8 million tonnes to the EU in January-June 2023. This was 25.2% less year-on-year.
Source: EUROSTAT, 2024
Gas Union with FSRU
However, the EU is dependent on gas, and this is evident from the dynamically growing number of regasification installations. Systems based on gas carriers could be built quickly, and these systems began to grow like mushrooms after rain. Only in Poland is the FSRU project in the Gulf of Gdańsk at a snail’s pace and today the floating terminal is twice as expensive as it was over 10 years ago
About 75% of the new regasification capacity launched in EU seaports from 2022 are floating storage and regasification terminals (FSRU). Such terminals have recently been installed by Germany, and in southern Europe by Croatians and Greeks, significantly increasing energy security. And this is happening in countries that have much more developed energy based on solar and wind installations than Poland.
Including FSRU in the gas import system allows for the potential reuse or relocation of floating infrastructure in the event of a significant decrease in its use. Thus, the gas carrier can be used to fulfill long-term gas import contracts. And the global LNG supply capacity to the market is growing rapidly as a result of intensive investments in marine export terminals. It is predicted that by 2030, supply may increase by more than 200 million tons, which is about 50% of the current annual LNG trade volumes. The United States is still actively focusing on building export potential. The high dynamics of investment in marine LNG terminals will continue unless the decision to suspend the granting of new LNG export permits acts as a brake.