EU to support Vertical Gas Corridor with US LNG poised to boost region: EU official

The EU will offer its support to the planned development of the Vertical Gas Corridor project as part of efforts to diversify gas supplies, with US LNG expected to play a pivotal role in boosting energy connectivity across the region, an EU official with knowledge of the project has told S&P Global Commodity Insights.

The planned gas corridor is designed to expand transportation capacity in Southeast, Eastern and Central Europe, allowing for greater volumes of regasified LNG to flow into the region.

Jointly developed by nine gas transmission system operators across the region, the project is designed to offer CEE countries greater access to LNG at a time when existing Russian gas supplies to the region could cease to flow at the end of 2024.

“I think we all recognize the increasing need for gas in this region, and the Vertical Gas Corridor is going to be a crucial part of that conversation,” the EU official said.

“This is a very live and important issue, and it’s being discussed in the CESEC context,” the EC official added. “We are interested in all projects that are aimed at further reducing the dependence of this region or other regions on Russian gas.”

The Central and South Eastern Europe Energy Connectivity (CESEC) High-Level Group – set up in 2015 -- coordinates efforts to facilitate cross-border and trans-European energy infrastructure projects in the region.

The Vertical Gas Corridor comes as Europe’s appetite for LNG remains robust, spurred by objectives set out in its REPowerEU plan, and a target to entirely phase out Russian fossil fuels by 2027.

And the likely end of the Russia-Ukraine transit deal is expected to require a remapping of gas flows across Central Europe in particular, with the EU working on the basis that the transit deal will cease at the end of 2024, the official said.

“We have carefully looked at this with the member states and the industry in the region to check that there won’t be an impact on security of supply or indeed, we hope on prices”, the EU official said. “We’ve tested that rigorously, repeatedly, and we’re satisfied that there won’t be any impact.”

In terms of numbers however, diversifying Europe’s gas balance and maintaining price stability poses an ongoing challenge for the EU. Strengthening its LNG import capacities have helped, but both Russian pipeline gas and LNG continue to find their way to Europe.

While imports of Russian pipeline gas in the second quarter of 2024 were recorded some 59% lower compared to the first quarter of 2021, rising prices meant its value over the period fell by much less, estimated at 32%, European Commission data showed.

In real terms, Russia’s share in EU imports of pipeline gas fell from 29% in the second quarter of 2022 to 18% in the second quarter of 2024.

In the first quarter of 2024 however, Russian LNG imports were 7% higher when compared to the same period in 2021, but rising prices meant the value of that LNG rose by 164%.

Equally, Russia’s share in EU imports of LNG rose from 16% in the second quarter of 2022, to 18% in the second quarter of 2024.

US LNG

US LNG imports, meanwhile, were a “crucial part” of Europe’s ability to get through its energy crisis in 2022-2023, owing in large part to strong political connections with the US, the official said.

Since the beginning of 2022, Europe has imported some 149.72 million mt (206 Bcm) of US LNG, data from S&P Global Commodity Insights showed.

Imports are expected to continue to play a key role in the Vertical Gas Corridor, with US companies said to be “extremely interested” in the project, particularly for regasification at the recently-commissioned Alexandroupolis LNG terminal in Greece.

“We are glad the necessary infrastructure exists to bring in LNG from all new sources, and the US is obviously a big one,” the official said. “We’re very pleased to have US LNG companies there.”

US LNG exporter Venture Global was the latest company to sign up for capacity at Alexandroupolis, agreeing to a binding five-year terminal use contract for 25% of regasification capacity beginning in 2025.

Bulgaria's Bulgargaz, among others, also has capacity booked at the terminal.

It comes at a time when spot LNG prices for delivery to the East Mediterranean remain high.

Platts, part of S&P Global Commodity Insights, assessed the DES East Mediterranean marker at a recent high of $13.72/MMBtu on Oct. 25. It assessed the price at $13.135/MMBtu on Oct. 29.