Europe’s rush to LNG could turn into ‘world’s most expensive and unnecessary insurance policy'

Europe's accelerated buildout of liquefied earthy state infrastructure is connected way to acold transcend request by the extremity of the decade, according to caller research, with much than fractional of the region's planned LNG assets seen astatine hazard of becoming idle.

The European Union has pledged to wean itself disconnected Russian fossil fuels by 2027 successful effect to President Vladimir Putin's full-scale penetration of Ukraine, with galore subordinate states fast-tracking plans to bring successful alternate sources of state from countries specified arsenic the U.S. and Qatar.

Several countries including Germany, Italy, Greece, the Netherlands and France person announced caller LNG projects oregon the enlargement to existing ones successful effect to the shutdown of Russian state pipelines.

The scramble to screen aboriginal vigor needs, however, puts European countries astatine hazard of wasting colossal sums of money, according to the Institute for Energy Economics and Financial Analysis.

IEEFA, a U.S.-based deliberation tank, said successful probe published Wednesday that Europe's appetite for caller LNG projects could massively outstrip request successful the coming years.

The continent's LNG terminal capableness is acceptable to transcend 400 cardinal cubic meters (bcm) by 2030, IEEFA said, citing existent infrastructure buildout plans. This is up from 270 bcm astatine the extremity of past year. IEEFA included the U.K., Norway and Turkey successful its analysis.

By contrast, request for LNG crossed Europe is projected to scope betwixt 150 bcm, according to IEEFA, and 190 bcm, according to S&P Global Commodity Insights.

IEEFA said the mismatch betwixt Europe's aboriginal LNG request and import facilities could effect successful 200 bcm to 250 bcm of unused capableness by 2030 — equivalent to astir fractional the EU's full state request successful 2021, which was 413 bcm.

"This is the world's astir costly and unnecessary security policy," said Ana Maria Jaller-Makarewicz, vigor expert for IEEFA Europe and writer of the analysis.

"Europe indispensable cautiously equilibrium its state and LNG systems, and debar tipping the standard from reliability to redundancy. Boosting Europe's LNG infrastructure volition not needfully summation reliability — there's a tangible hazard that assets could go stranded," Jaller-Makarewicz said.

The highest hazard of stranded assets was seen successful Spain (50 bcm), Turkey (44 bcm) and the U.K. (40 bcm), portion IEEFA said it expects a 36% utilization complaint of Europe's LNG terminals by the extremity of the decade.

A spokesperson for the European Commission, the EU's enforcement arm, was not instantly disposable to comment.

Speaking earlier this month, the EU's vigor argumentation main called connected EU countries and companies to halt signing caller contracts to bargain Russian LNG arsenic it seeks to trim its vigor dependence connected the Kremlin.

"I promote each subordinate states and each companies to halt buying Russian LNG, and not to motion immoderate caller state contracts with Russia erstwhile the existing contracts person expired," EU vigor commissioner Kadri Simson said connected March 9, Reuters reported.

The EU's large LNG capableness stake has besides sparked biology concerns, with probe published precocious past twelvemonth from Global Energy Monitor informing that plans to treble the bloc's LNG import terminal capableness endanger to derail clime goals portion besides doing small to code the vigor crisis.

Analysts astatine GEM noted astatine the clip that astir of the LNG contracts secured by EU buyers were scheduled to commencement from 2026 and proceed for 15 to 20 years.

To beryllium sure, the burning of fossil fuels specified arsenic coal, lipid and gas, is the chief operator of the clime crisis.