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CEE’s nascent small scale LNG

With the prioritisation of the energy sector decarbonisation and greenhouse gas (GHG) emissions reduction commitments by 2050, liquified natural gas (LNG) is gaining momentum in Europe. The continent currently accounts for almost 25 per cent of the global LNG demand.

This colourless, non-toxic liquid which is mainly used to generate power or heat is generally considered a cleaner alternative to fossil fuels such as coal and petroleum—sources of energy that most economies of Central and Eastern Europe still depend on.

According to the US Department of Energy report on Central and Eastern Europe, the CEE region currently has relatively limited access to LNG terminals but the cost-effectiveness, the easy transportability over long distances to end-users even to locations where pipeline infrastructure may be limited or absent make the liquified natural gas n attractive source of energy for CEE. Especially, in light of the EU’s emissions reduction policies and energy supply security aspirations of its Member States.

Differentiating conventional from small scale LNG

Unlike large-scale LNG which typically serves consumers or localities that require large volumes of energy through the complex infrastructure of liquefication plants, storage tanks, shipping vessels and regasification units, small-scale LNG can be directly used in liquid form and meet a unique set of needs of customers with off-grid demands that are too small for conventional suppliers. These customers range from small-capacity plants, heavy-duty trucking, rail and marine to farms, power generation facilities in small or remote communities and others.

small scale LNG
Source: US Department of Energy, Opportunities for small-scale LNG in Central & Eastern Europe, 2020

Mapping small scale LNG in CEE

While there are 29 large-scale LNG import facilities in the entire Europan continent, its Central and Eastern region counts only two such terminals in Lithuania and Poland as well as one new LNG terminal on the island of Krk, Croatia which launched operations as recently as in January 2021.

When it comes to small-scale LNG terminals, however, Europe’s map is much more sparse. Dedicated sources inform that such projects are mostly at the stage of consideration across the continent.

Studies project that in the CEE region and among the Energy Community Treaty signatories the prospects for small-scale LNG adoption vary and will take from a minimum of 2 to 5 years or longer.

Countries with limited barriers for small-scale LNG adoption and near-term potential include Hungary, Poland, Serbia, Albania, Slovakia and North Macedonia. Those with significant barriers who will require 5 years or longer to establish small-scale LNG are Montenegro, Romania and Kosovo. The remaining countries – the Czech Republic, Slovenia, Croatia, Bosnia and Herzegovina and Bulgaria – will adopt small-scale LNG in the medium term of 3-5 years.

Lithuanian perspective on the large vs small scale LNG

Still, whether large scale or small, LNG is considered a reliable energy source in CEE, especially for those States that are particularly vulnerable to gas supply shortages.

Mindaugas Navikas, Chief Sales Officer of Klaipėdos Nafta, a Lithuanian oil and LNG terminals operator explains to CEENERGYNEWS the importance of both for Lithuania.

“Large scale LNG terminal (based on FSRU Independence) firstly plays the role of the region’s energy security (security of supply) because most of the region’s countries had a single source of gas supply – the pipeline. It also enables diversification of energy sources and spurs competition by allowing third-party access to the terminal’s capacity”, he says.

Overall, “[LNG] has played a very important role by lowering natural gas prices not only in Lithuania but also in the other part of the region since the launch of the Balticconnector junction between Estonia and Finland”, according to Mr Navikas who also underlines that this year alone, Lithuania imported 65.6 per cent of gas through the LNG terminal in a 9-month period.

As it turns out, Lithuania is taking its first steps to encourage the emergence of small-scale LNG stations through recently-approved financial mechanisms.

“Since 2017 only a few small-scale LNG regasification stations were developed in Lithuania for the off-grid users, this is due to the well-developed gas grid infrastructure”, Mr  Navikas tells CEENERGYNEWS and adds, “previous government started subsidising usage of biomass, therefore currently a lot of biomass boilers are installed, and perhaps consideration about LNG as an alternative energy source will be actual again when installed boilers will be decommissioned”.

Still, one challenge that exists in relation to small-scale LNG according to Mr Navikas, “is slightly higher LNG molecule price in comparison to large scale, because of smaller delivery volume per voyage and little competition of small-scale services providers”.

Croatia’s lesson from small scale LNG reloading

In May 2021, Croatia’s LNG terminal on the island of Krk, completed its first small-scale LNG reloading operation which was challenging, yet successful as the operation made Croatia a leader in the CEE market for the provision of such service.

Hrvoje Krhen, Managing Director of LNG Croatia tells CEENERGYNEWS that the reloading was challenging because it “was the first time in Croatia that the LNG was discharged from the FSRU ship to another small scale LNG ship. Until then, each operation involved discharging from an LNG carrier to an FSRU ship with regasification processes”.

However, the operation “proves and confirms the possibility of a ship to ship operation and discharge of LNG to any other LNG carrier (small scale) which can then use these quantities of LNG either to fill a bunker station or to fill other ships that use LNG as a transport fuel”, Mr Krhen tells CEENERGYNEWS.

Is LNG a bridge to the emissions-free energy sector?

Despite a much lower emissions track record of LNG in comparison to other fossil fuels, environmentalists point to its indirect and cumulative emissions and warn of the lock-in effects that LNG can have for fossil-dependent economies over the long term.

In its 2020 report, the Natural Resources Defense Council (NRDC), the United States-based international environmental advocacy group, emphasises that “the liquefaction, tanker transport and re-gasification steps required for overseas export can account for up to 21 per cent of total life-cycle emissions for LNG”. The organisation urges that any liquified natural gas project and its long-term effects should be carefully considered by financial institutions.

Similarly, Climate Action Network Europe (CAN), the coalition of European NGO’s maintains that Europe’s regions that invest in gas today, including in LNG will have to go through another transition in a couple of decades due to the commitments to climate neutrality by 2050.

“This transition must happen well before the end of the new gas infrastructure operational lifetime and long before it will be paid off. A new pipeline or LNG terminal can operate for 80 years. Rather than resulting in rewarding returns for the economy, they will become stranded assets for communities and taxpayers to pay”, states the coalition’s joint letter.

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