Europe draws criticism for plans to spend $91.5B on new gas projects

By Murat Temizer

San Francisco-based think tank Global Energy Monitor (GEM) criticized European countries for planning to invest €84.1 billion ($91.5 billion) in natural gas, "as if it is still in crisis," despite being in a much safer position than two years ago.

In its latest report, GEM noted that Europe's planned natural gas projects, if built, would increase its import capacity by 55%.

According to the report, Europe already has twice as much import capacity as its liquefied natural gas (LNG) demand and this could quadruple by 2030 if the planned projects are built.

"With €84.1 billion in new liquefied natural gas (LNG) terminals and gas pipelines in planning, a gas infrastructure buildout is proceeding in Europe as if the region were still in crisis, even though it is in a far more secure position than it was two years ago," it said in the report.

It stressed that the EU's goal of reducing emissions by 55% by 2030 would be in conflict with the fact that, if the LNG terminals and gas pipelines now under construction are operated to their maximum capacity, they will produce emissions equal to fifty coal power plants on an annual basis.

The report stressed that high gas investments are not in keeping with Europe's energy transition, particularly given the increased renewable energy production in Europe and wind power, which surpassed natural gas for the first time last year.

According to GEM, European countries are developing 248.7 billion cubic meters (bcm) of new LNG capacity as well as 16,491 kilometers of pipelines. This includes cross-border pipelines that could import 46 bcm of gas per year.

Europe is estimated to spend €84.1 billion – €44.4 billion on LNG terminals and €39.7 billion on pipelines. The GEM report said that projects currently under construction cost €10 billion and that Germany, Italy and Greece, which have developed the most gas infrastructure in Europe, are responsible for around €45 billion of these plans.

According to GEM's forecasts, Europe's LNG import capacity was 319 bcm last year, while demand remained at 167 bcm. Demand is expected to fall to 135 bcm in 2030 and capacity is projected to increase to 568 bcm.

- Projects and plans

The countries with the most LNG import capacity under development in Europe are Germany with 98.9 bcm, Italy with 31.3 bcm, Greece with 26 bcm and the UK with 24.2 bcm, according to the GEM report.

Germany stands out as the country with the greatest LNG import capacity under development in global markets, after China and India, despite having no import facilities two years ago.

Greece ranked first in pipeline construction with 2,795 kilometers, followed by Italy with 1,923 kilometers, Poland with 1,516 kilometers, Serbia with 1,081 kilometers and Romania with 1,052 kilometers.

The report also disclosed that Europe's LNG plans have progressed rapidly since the beginning of 2022, but the delays seen in 2023 could be considered an indication of waning enthusiasm.

Europe has a total of 11 LNG terminals under construction, including capacity expansion. The most costly of these is Germany's BrunsbUttel LNG terminal, which has a capacity of 8 bcm at a cost of €1.3 billion.

Among the 39 proposed LNG projects is Germany's 20 bcm-capacity Wilhelmshaven TES LNG terminal, at a cost of approximately €9 billion.

This project is followed by the UK's 6.3 bcm capacity South Hook LNG Terminal expansion project at €2.8 billion. In third place is Greece's Thrace Floating LNG Storage and Regasification Unit (FSRU) with a capacity of 6 bcm.

In terms of pipeline investments, Poland's 308-kilometer Gustorzyn-Wronow project, which is under construction at an investment cost of €1.1 billion, ranks first. This is followed by Ukraine's 273-kilometer Taganrog-Melitopol-Berdyansk pipeline.

Of the 29 pipeline projects proposed, the 1870-kilometer-long EastMed Pipeline at a cost of nearly €6 billion and the 976-kilometer-long Poseidon Pipeline at a cost of more than $3 billion are notably the largest.

- Europe's decision to diversify from Russian gas

Following the outbreak of the Russian-Ukrainian war in February 2022, European countries committed to reduce their natural gas imports from Russia.

EU countries mainly use natural gas for power generation, industrial and residential use. In 2021, the bloc was dependent on Russia for around 45% of its gas imports.

With its "REPowerEU" plan, launched in May 2022, the European Commission set out a roadmap for the EU to reduce its dependence on Russian gas by, among other actions, reducing gas demand, increasing the share of renewable energy and filling the gas gap with LNG imports from the US.

As Europe pulled LNG cargoes from Asia, LNG prices soared and the gas crisis that was limited to Europe expanded into a global gas crisis. Wealthier importers, like Japan, are paying exorbitant prices for LNG, while emerging economies such as Bangladesh and Pakistan are completely shut out of the market.

While Europe is currently experiencing its second winter since the start of the war, according to the GEM, Europe's gas crisis can be considered over.

Europe's natural gas storage levels have been above average over the past two winters, and 99.6% full in November. Europe is now able to import enough gas from global markets to meet demand.

European countries were also chastised in a recent report by the Institute for Energy Economics and Financial Analysis (IEEFA) for utilizing LNG terminals at half capacity.