March 09, 2026 [Storage Terminals Magazine]- OX2, Sodra, and e-NG project development company TES have announced that they are advancing their development plans for an e-NG facility at the Varo peninsula in Varberg, Sweden, by entering the pre-frontend engineering design phase. The decision follows the signing of a letter of intent in January 2025 and the successful completion of an initial feasibility study assessing the technical and commercial viability of the concept.

Sweden imports significant quantities of fossil natural gas and biogas to supply chemical and industrial companies that depend on gas in their processes, primarily via pipeline from Denmark, with fossil-based natural gas still representing the lion’s share of the energy mix. The Varo e-NG project has the potential to materially support the Swedish energy transition, economy, and energy security and resilience.

The facility is designed to produce 1.2 TWh of e-NG (e-methane) annually. e-NG is produced by capturing biogenic CO₂ from Sodra’s pulp mill at Varo and combining it with hydrogen produced onsite using renewable electricity. With 1.2 TWh of e-NG, the share of Swedish-produced fossil-free gas in the Swedish gas grid would increase significantly, representing more than a fourfold increase in domestic production of fossil-free gas.

The Pre-FEED phase, which will be carried out over a one-year period, is partly supported by SEK 16.8 million (approximately €1.6 million) in funding from the Industrial Leap (Industriklivet), the Swedish Energy Agency’s programme for industrial decarbonisation, which forms part of the EU Recovery and Resilience Facility and Next Generation EU. The funding will cover approximately 50 percent of the Pre-FEED and development costs.

During the Pre-FEED phase, the partnership will draw up technical designs, evaluate the potential for integration with Sodra’s existing pulp mill operations, secure the necessary grid connections for electricity and gas distribution, advance permitting processes, and refine commercial agreements.

The partnership brings together complementary capabilities across the value chain. Sodra operates the pulp mill that generates biogenic CO₂ as a by-product of its production processes. OX2 develops large-scale renewable energy projects in the region, while TES specialises in e-NG production technology and contributes technical know-how and market insight gained from scaling up similar projects globally.

e-NG is a fossil-free, chemically equivalent alternative to fossil natural gas, serving as a drop-in fuel that can be used immediately in existing infrastructure without modification. Potential applications include maritime fuel, chemical industry feedstock, and industrial processes.

The project has established a Heads of Agreement with an energy major for the purchase of the majority of the planned production volume. Subject to the findings of the Pre-FEED phase and a subsequent investment decision by the partners, the facility is expected to enter operation in the early 2030s, in time for the entry into force of sizeable EU RED III RFNBO obligations. Decisions on progressing to subsequent stages will be taken jointly by the partners based on the results of the current phase.

Emelie Zakrisson, country manager of OX2 Sweden, described the Varo e-NG project as a unique opportunity to deliver large-scale Swedish production of renewable gas close to the existing distribution pipeline. She stated that combining Sweden’s natural resources with strong industrial know-how gives the project the potential to support the industry’s transition, cut emissions, and move Sweden closer to real energy self-sufficiency.

Johannes Bogren, business area president of Sodra Bioproducts, described the project as a strategic opportunity to turn existing biogenic CO₂ into renewable gas at scale. He noted that by integrating Sodra’s processes with emerging market needs, the project can strengthen long-term value creation, enhance the value of every tree, and support industry’s shift away from fossil gas in Sweden and across Europe.

Marco Alverà, co-founder and CEO of TES, highlighted that Sweden’s abundant renewable power, access to biogenic CO₂, and strong industrial base provide the foundations to pioneer large-scale e-NG production. He expressed confidence that together with Södra and OX2, the partnership is developing a project ready to meet the growing demand driven by RED III obligations across Europe.

The Varo e-NG Project is funded through the Industrial Leap, which is part of the EU Recovery and Resilience Facility (RRF) and Next Generation EU, a government initiative run by the Swedish Energy Agency.