Europe's regasification buildout outpaces 2024 LNG imports

Europe's regasification capacity surged after the Russia-Ukraine war to allow for an increased reliance on LNG; however, the buildout has outpaced LNG imports in 2024.

The rapid expansion in regasification capacity allowed Europe to rely on LNG as it weaned off Russian pipeline volumes.

Unlike other geographical hubs, Europe's strong pipeline infrastructure with major gas supply hubs, such as Norway and Algeria, allowed it to satiate domestic demand with pipeline gas atop LNG inflows.

While the expansion opened Europe's gates to a global market, continued healthy flows of pipe-gas from Russia, Norway and Algeria have capped the increases in LNG imports.

Europe has imported 100.01 million mt of LNG so far this year, or 1,650 cargoes, a 25% drop from 2023, S&P Global Commodity Insights data showed as of Dec. 27.

Over the same period, the continent imported 124.15 million mt, or 2,077 cargoes, in 2023 and 126.02 million mt, or 2,158 cargoes, in 2022.

The volume in 2022 was the highest Europe ever imported in a year.

Regasification buildout growth slows

The monthly regasification buildout has outpaced imported volumes to Europe month over month.

By the end of December, the overall monthly regas capacity in Europe would be 21.15 million mt, increasing from 20.08 million mt by the end of 2023, according to Commodity Insights data.

Greece added the most monthly capacity at 360,000 mt with the new Alexandroupolis floating storage and regasification unit in September. Belgium's capacity increased to 940,000 mt from 730,000 mt and Germany's increased to 1.28 million mt from 1.14 million mt.

Spain remained the country with the largest scale of regas facility, at 4.08 million mt of capacity per month. It was followed by Turkey at 3.19 million mt and the UK at 2.99 million mt.

However, given a drop in LNG imports, the growth rate of LNG facility buildout has slowed down in 2024.

In 2023, monthly regas capacity increased by 3 million mt, a much higher rate than the 1 million mt in 2024.

Traders said the slowdown was due to a lack of incentive as the price of LNG was becoming less competitive than pipe-gas.

"There's so much regas which has kept LNG and gas prices narrow but given these tight spreads, the economics of importing LNG aren't as favorable as buying pipeline," an LNG trader said on the lower utilization.

The utilization rate of regasification projects ranged 31%-55% throughout the year. Gate, Fos Tonkin and Adriatic topped in terminal usage rates, with close to 100% utilization in 2024.

LNG-gas spread narrows

Platts, part of Commodity Insights, assessed the DES Northwest European marker for February at $13.76/MMBtu on Dec. 24, a 20 cents/MMBtu discount versus the Dutch TTF gas hub.

NWE-TTF spreads averaged around a 21 cents/MMBtu discount since the start of the winter heating season on Oct. 1, Commodity Insights data showed.

This compared to the average NWE-TTF discount of around 75 cents/MMBtu in 2023 over the same period.

"There is a lot of cheap gas going in southeast Europe but if the transit expires, then maybe that will spark the market to buy more LNG," a second trader said.

"LNG is priced way above downstream market prices, and it does not make sense to buy LNG. If you think about all the entry, tariff costs for Alexandroupolis, for example, it costs Eur10 more or around $3.50[/MMBtu] to import LNG and reexport it rather than buying gas."

Utilization rates could improve in 2025 should the Russia-Ukraine transit agreement expire, as Europe looks to replenish the lost 42 million cu m/d of gas with LNG, traders said.

The 15 Bcm/year capacity under the transit deal would equate to around 12-13 cargoes of LNG each month that Europe would need to replace, sources said.

"As the combined output from other gas supply sources -- namely indigenous production, Norway, Algeria, Libya and Azerbaijan -- is not expected to grow in 2025, LNG will be the sole source to replace lost Russian pipeline imports and meet incremental demand," said Alija Bajramovic, senior research analyst for European and Russian LNG with Commodity Insights.

"We forecast that Europe's dependency on LNG will reach a record high, with its share of total gas supply exceeding 40% for the first time in history."

The cessation of pipeline gas imports from Russia is expected to boost LNG deliveries to Continental Northwest Europe, as it is the most cost-effective option for importing LNG for the Central Eastern European region, Bajramovic added.

Commodity Insights expects that LNG deliveries to terminals in France, Belgium, the Netherlands, the UK and Germany will rise to 285 million cu m/d, an increase of 22% year over year.