Record-setting Q2 at northwest Europe’s LNG terminals
Six of the region’s eight LNG terminals saw deliveries above 80pc of capacity for a second consecutive month
All of the LNG terminals across Poland, the Netherlands, Belgium and France’s Atlantic coast received deliveries in May at more than 80pc of their processing capacity, as did the UK’s South Hook terminal, according to data by leading cargo tracking firm Kpler. This marks the second month that six of the facilities that can readily supply into northwest Europe (NWE) have topped 80pc utilisation for the first time since the so-called ‘LNG wave’ started emerging in early 2019.
Five terminals hit 80pc utilisation in November 2019 and six in December, marking the only other time when this milestone was close to being reached.
Four terminals—the Dutch Gate, Belgian Zeebrugge, French Montoir and Polish Swinoujscie facilities—received deliveries above their nameplate capacities, while South Hook operated at 90pc and France’s Dunkerque unit just below that.
The UK’s Dragon terminal was used at under 40pc of its capacity, but this followed six months where its utilisation rates have been anywhere from 70pc to over 125pc. The other British terminal, Isle of Grain, attracted volumes equivalent to just 10pc and has recorded utilisation rates above 50pc on just two occasions, in November and December 2019, since the start of 2018. Grain has the most complicated capacity ownership structure, with rights to berthing slots and storage fragmented across three separate phases of the project.
>80 – Utilisation rates at six terminals
New import terminals
Significant use of NWE’s existing terminals and lack of idle capacity are important in making a business case to invest in additional LNG import facilities in the region. There are ambitions to construct a new regasification plant in Ireland, but Germany is the main focus, with three competing proposals: a Brunsbuettel terminal with a capacity of a 5bn m³/yr, a 10bn m³/yr facility at Wilhemshaven and a proposed 5-8bn m³/yr unit at Stade.
The subsidiary of German utility Uniper developing Wilhelmshaven signed a contract with Japanese shipping firm Mol in lat May to build and charter a floating storage and regasification unit (FSRU) for use in the project. Uniper, a capacity holder in Grain, predicts that “the significant decline of domestic natural gas production in Europe makes further expansion [in LNG import facilities] both a sensible and necessary course of action for the gas industry”.
But there is a significant obstacle to LNG replacing the supply security and flexibility provided by NWE’s indigenous production. The vast majority of LNG arrives in the region on a short-term or spot basis, hence why utilisation rates have jumped as global LNG supply has become more abundant. When the LNG supply-demand balance is tighter, NWE sees far fewer deliveries, as Asian customers can use their contractual rights to secure supply. Moreover, in Asian markets that are not fully liberalised, buyers there can more easily pass on higher costs to captive customers, so they can, in effect, always outbid Europe for available spot volumes too.
If NWE is targeting LNG as a reliable replacement for declining Dutch and UK supply, capacity holders in new and existing terminals may have to significantly tweak their contractual models to give them more concrete access to volumes as and when the global market tightens again.