Wednesday, May 18, 2022

HomeOil & GasEurope must make some adjustments if it wants to reduce its dependence...
Powered by

Europe must make some adjustments if it wants to reduce its dependence on Russian gas

Earlier in March, the European Commission proposed an outline of a plan to make Europe independent from Russian fossil fuels, well before 2030.

Indeed, the EU imports 90 per cent of its gas consumption, with Russia providing more than 40 per cent of the EU’s total gas consumption. Russia also accounts for 27 per cent of oil imports and 46 per cent of coal imports.

The so-called REPowerEU plan will increase the resilience of the EU-wide energy system based on two pillars: first, by diversifying gas supplies, via higher Liquefied Natural Gas (LNG) and pipeline imports from non-Russian suppliers and larger volumes of biomethane and renewable hydrogen. Second, by boosting energy efficiency, increasing renewables and electrification and addressing infrastructure bottlenecks.

Will non-Russian LNG be enough for Europe?

With regards to the first pillar, Vincent Demoury, General Delegate of the International Group of Liquefied Natural Gas Importers (GIIGNL), reminded that in 2021 the EU and the UK combined imported 68 million tonnes of LNG.

“To reach the Commission’s targets, they need to import further 37 million tonnes, which is equivalent to 10 per cent of the global energy market, in other words, the export fo Egypt and Algeria and Nigeria combined. Not a small number,” he said, speaking at eFlame on 17 March.

“We see a very high utilisation rate of LNG in Europe and if this is to be maintained, which is a basic assumption, the EU would be able to import actually more than the targets set out by the Commission,” Mr Demoury added. “But this means that we will need to make some adjustments in the transmission networks.”

In fact, the LNG capacity is very concentrated in some countries only, which reduces the capacity to import more LNG. Thus, more receiving capacity will be needed.

“The main drivers to assess Europe’s ability to attract more volume is the amount of LNG in the global market,” Mr Demoury explained. “And the EU must enter in competition with Asia especially if the latter reduces coal consumption and move to natural gas.”

So, where can Europe find more flexible LNG? According to Mr Demoury, first, from those projects starting or restarting in 2022. Out of these, the US has the potential for 14.5 million tonnes (mt) per annum. Second, flexible volumes derived from fuels substitution in Asia and from price-sensitive countries. Finally, volumes derived from negotiations of DES contracts.

If so many new investments in natural gas and LNG are needed, some might fear that the environmental aspect will be forgotten.

“The question, actually, is more about what do we do if we don’t have more gas and LNG coming to Europe? Will we decrease the demand? Will we ramp up biomethane or hydrogen?,” asked in return Vincent Demoury. “We see coal use now increasing again in several countries, so the question is an urgent one. Since liquified natural gas plants and terminals are capital intensive, 15 years contracts are the best options, although something shorter must not be excluded.”

Luis Ignacio Parada, Energy Policy and Global Regulation Director at Enagás recalled that the Commission had the plan for an LNG and storage strategy. Although some of the infrastructure and interconnections were implemented, most of them were not and now we miss them.

“However, to see these implementations in the infrastructure, we need Member States to be aligned and to not exclude very good opportunities like the TAP pipeline to diversify gas imports from Azerbaijan,” he said.

Additional 15 mt of renewable hydrogen: it is doable and we can do more

In the REPowerEU plant, the Commission also mentioned an additional 15 mt of renewable hydrogen (on top of the 5,6 mt foreseen under the Fit for 55) which can replace 25-50 billion cubic metres (bcm) per year of imported Russian gas by 2030. This would be made of an additional 10 mt of imported hydrogen from diverse sources and an additional 5 mt of hydrogen produced in Europe, going beyond the targets of the EU’s hydrogen strategy and maximising the domestic production of hydrogen.

“It is doable and we can do even more but we need to adjust a number of things,” said Mr Parada. “For example, we need targets in legislative pieces, like in the Decarbonisation Package or in the RED III, so those specific things can be clarified and targets can be met.”

Among other measures, Mr Parada mentioned the importance to include hydrogen in an EU-wide certification system for renewable fuels, as we cannot afford to wait until 2024. Also, accelerating permitting for renewable energy projects.

“We don’t have a framework for hydrogen, it is not slow or bad, we don’t have it,” he pointed out. “We need Member States to establish at least temporary framework to handle hydrogen infrastructure (pipelines, storages) until a wider package is approved, otherwise it will be too late.”

On a positive note, Eva Hennig, Head of Department for EU Energy Policy at Thüga Group, concluded by saying that we do not need to invest billions of euros to reach the hydrogen targets.

“Most of the infrastructure is almost hydrogen ready,” she underlined. “However, we have to connect biogas plants to the grid as most of the onshore hydrogen will be connected to the distribution grid which means we will start with blends.”

Mrs Hennig mentioned Ready4H2, a new alliance of 90 local gas network operators in 16 countries across Europe, dedicated to developing and sharing their expertise to deliver the hydrogen transformation. Currently, over 1 million kilometres of pipelines are material ready for conversion to pure hydrogen, representing 96 per cent of the combined network of Ready4H2 members. Among those, there are projects in Central and Eastern Europe as well, namely in Slovakia (33,000 kilometres), the Czech Republic (65,000 kilometres, 100 per cent ready to transport hydrogen), Greece (7,000 kilometres). Poland and Ukraine are currently under investigation for the readiness of the components.

Also according to her, the EU legislation should incentive and speed up renewables and low carbon gases without creating barriers. Indeed, it doesn’t make sense to have dozens of individual operators when they can be connected and work side by side.

Sign up to our biweekly newsletter

    Most Popular