Second LNG Wave Set to Drive European Terminal Expansions
12.02.2019 - NEWS

December 02, 2019 [ICIS] – A second wave of LNG to Europe expected from 2023 has been the cause of a flurry of activity in capacity increases at a number of terminals, including Gate, according to according to Stefaan Adriaens, commercial manager at the Dutch Gate terminal. This trend could continue over the coming years.

Adriaens expects the current LNG wave to Europe to continue in 2020, but to then decrease until the next wave of production comes online around 2023-24, which he thinks might be bigger than the current influx.

So far in 2019, 78 vessels delivered LNG supply to the Gate terminal, 37 vessels more than the same period last year, LNG Edge data showed.

Gate announced an open season in March for 1 billion cubic metre (bcm)/year of available and 2bcm/year of additional capacity at the terminal. However no contracts were signed by the 19 April deadline despite interest from market participants and the signing of several confidentiality agreements.

Since then, the terminal has been offering this capacity on a first-come-first-served basis to market players.

Gate is not the only regional terminal keen to increase its capacity.

– Poland’s Swinoujscie terminal plans to increase its capacity from 5bcm/year to 7.5bcm/year by 2023

– France’s Elengy has been testing market interest for post-2020 capacity for Medmax and small-scale LNG vessels

– The UK’s Grain LNG, which operates the Isle of Grain terminal, launched an open season earlier in November for 5mtpa of new capacity in 2025.

“I think that the anticipation of this second wave is causing many EU-terminals to hold open seasons, including Gate. This is supported by the high activity levels of LNG arrivals over the last 12 months,” Adriaens told ICIS.

TTF AS LNG PRICE MARKER

ICIS reported earlier this month that the second wave of US LNG exports could be priced partly on the Dutch TTF, according to various buyers and sellers active on the global LNG market.

Europe has become an attractive destination for US sellers, due to the continent’s vast storage capacity and liquid trading hubs, mainly the TTF, to find a market for excess production.

The LNG glut in Europe also supported hedging activity on the TTF and a second wave of US LNG exports from 2023 could further boost the hub’s liquidity.

“TTF is the logical price marker for LNG,” said Adriaens.

“Prices are set at the margin and TTF is both the marginal LNG demand, in case of over-supply, and the marginal LNG supplier, in case of reloading or trans-shipment when there is under-supply,” he said.

ICIS is the benchmark provider for TTF OTC gas price assessments.

Russia’s Nord Stream 2 starting up in 2020 is unlikely to limit LNG supplies into Europe, Adriaens said, as the pipe is partly “a substitute for existing flows” and TTF pricing will clear the excess volumes.

TERMINAL COMPETITION

Apart from the already operational LNG terminals in neighbouring countries, Gate could face more competition from planned German terminals .

The Wilhelmshaven LNG terminal, backed by German utility Uniper is scheduled to begin commercial operation in 2023.

The German LNG project in Brunsbuttel is currently awaiting a final investment decision (FID).

The joint venture which is behind the German LNG project include Dutch grid operator Gasunie and tank storage companies Vopak LNG and Oiltanking.

Gasunie and Vopak LNG are joint owners and operators of the Gate terminal.

A spokeswoman at German LNG told ICIS key decisions leading up to the FID will be taken around the end of 2019 and early 2020, including the procurement and construction contractor in January.

“The permit approval process has already started and will be continued in 2020. After receiving the permit we currently expect a three-year construction phase,” she said.

“We are happy to have already several heads of agreement, amongst others with Axpo from Switzerland and with RWE from Germany. Negotiations with other interested parties are ongoing and promising.”

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