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Europe’s energy infrastructure lacking


Before Russian soldiers invaded Ukraine on February 24th, Europe was already experiencing a shortage of Russian electricity, and now it appears at the mercy of the cold winter weather. In response to the West’s decision to apply harsh sanctions after Moscow’s invasion of Ukraine, Russia has since reduced gas flows.

The European Union has made the decision to “wean” itself off of Gazprom’s energy, promising a record-breaking wave of investment in renewable energy and a construction boom for liquefied natural gas import infrastructure. Construction of such facilities generally takes three to five years, although there is currently a rush to complete them sooner.

Marine tracking agencies started displaying hundreds of LNG containers around Iberian coasts in October, presumably because regasification plants were finding it difficult to handle the volume rise as Europe sought to build up storage levels before winter.

Some of the cargoes were believed to be “hanging around” European ports as levels reached capacity and demand for gas from heavy industries in Europe, such as steel and cement, decreased as a result of high energy prices. The issue also had an effect on pipeline interconnectors, as demonstrated by the difficulty the UK had early this year in using a pipeline to transport excess gas to Belgium’s Zeebrugge hub.

In retrospect, it is conceivable to claim that worries about energy security were downplayed as Europe’s industrial powerhouses benefited from cheap gas. However, a lot of time was wasted, particularly in Germany.

The US expressed the greatest concern, but Germany’s industrial leaders tended to harbour suspicions that Washington might be only seeking market power for LNG for its own suppliers and had grown indifferent to the security of their Russian supply.

A joint declaration from the US and Germany was released in June 2021 with the intention of deterring Russia from misusing any pipelines. With the Nord Stream 2 project, however, Germany’s core interest in cheap Russian pipe gas triumphed, even at the cost of letting Russia forgo Ukraine as a gas transit route and forsake long-proposed plans for an LNG import terminal at Wilhelmshaven.

A project that would have been able to meet almost 10% of Germany’s gas needs and allow for the diversification of gas supply sources was abandoned.

However, as Golar LNG Chief Executive Karl Fredrik Staubo said in a recent interview, Europe is looking to a global LNG market with a capacity of around 400 million tpa in order to replace the equivalent of about 115 million tonnes per year of Russian pipeline gas. This worldwide market was already constrained before the conflict in Ukraine, and it may still see a period of corresponding European cold and resurgent Asian demand.

Staubo points out that Europe has so far secured 10 solid floating storage and regasification units, totalling 50 million tonnes of annual regasification capacity, with five in Germany, one in Finland, two in the Netherlands, and two in Italy.

This gap is staring Europe in the face as it attempts to choke off funding for oil and gas investments while ostensibly setting the pace for zero emissions. It could be a good idea to wean the continent off cheap gas, but the people of Europe are clamouring for a hard-to-find combination of cheap and clean energy. It won’t be simple to strike the correct balance in the policy.

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