Natural Gas Shipments, Mostly From U.S., Ease Europe’s Energy Crunch
Near the entrance to Rotterdam’s vast harbor in the Netherlands is a specialized port that is offering an alternative to the web of Russian pipelines that feed much of Europe’s hunger for natural gas.
The facility, called the Gate Terminal, is a critical entry point for liquefied natural gas, an increasingly vital fuel for Europe. This week a giant tanker ship, the GasLog Glasgow, sat at a jetty there, waiting for a winter storm to subside so it could unload liquefied natural gas from Egypt. Another vessel laden with gas waited its turn offshore.
“It’s very busy,” said Stefaan Adriaens, the commercial manager at the terminal.
A year ago, he said, the terminal was running at about 5 percent capacity. Lately, “we are running at 100 percent utilization.”
In recent months the price of natural gas has soared in Europe, drawing a parade of liquefied natural gas tankers to ports like Rotterdam. The very high prices reflect the crimping of Russian gas supplies to Europe, low fuel in the continent’s storage tanks and geopolitical worries over Ukraine, where, the United States and its allies believe, Russia may be preparing for an invasion.
The ships can carry enormous amounts because, when chilled to minus 260 degrees Fahrenheit, natural gas reduces into a liquid that takes up only one six-hundredth of its volume as a gas. Liquefied natural gas, known as LNG, is loaded on ships and transported to any location with facilities to receive the chilled fuel and warm it back to a gaseous state.
A large tanker, around the length of three football fields, can pack a powerful transfusion of energy — enough to light up to 70,000 homes for a year, according to an industry estimate.
Although the GasLog Glasgow’s cargo came from Egypt, a middling but growing gas power, most of the liquid gas flowing to Europe these days is from the United States.
The long-awaited energy battle between Russia, for decades the dominant gas exporter to Europe, and the United States, which for years has promoted its ability to export gas to customers, is at last playing out. Taking advantage of abundant gas from shale drilling, the United States has over the last six years grown from almost nothing to one of the world’s largest exporters of liquefied gas, along with Qatar and Australia.
“A lot of U.S. exporters have ramped up supplies to Europe in the last month or so,” said Ben Cahill, a senior fellow at the Center for Strategic and International Studies, a research organization in Washington.
While expanding rapidly, exporters with cargoes from the United States are also more likely than others to send their ships where they obtain the highest prices. The result is that, so far this winter, liquefied natural gas suppliers from along the Gulf of Mexico and elsewhere have bailed Europe out of what could have been a dire situation even without the standoff with Russia over Ukraine.
Understand Russia’s Relationship With the West
The tension between the regions is growing and Russian President Vladimir Putin is increasingly willing to take geopolitical risks and assert his demands.
- Competing for Influence: For months, the threat of confrontation has been growing in a stretch of Europe from the Baltic Sea to the Black Sea.
- Threat of Invasion: As the Russian military builds its presence near Ukraine, Western nations are seeking to avert a worsening of the situation.
- Energy Politics: Europe is a huge customer of Russia’s fossil fuels. The rising tensions in Ukraine are driving fears of a midwinter cutoff.
- Migrant Crisis: As people gathered on the eastern border of the European Union, Russia’s uneasy alliance with Belarus triggered additional friction.
- Militarizing Society: With a “youth army” and initiatives promoting patriotism, the Russian government is pushing the idea that a fight might be coming.
The Biden administration is also leaning on suppliers and their customers to help Europe out.
The liquefied gas shipments have been unusually large and have even outpaced gas imports from Russia in recent weeks. This surge highlights the fuel’s “contribution to gas supply security,” said Gergely Molnar, an analyst at the International Energy Agency, during a webinar hosted by the Clingendael International Energy Program in the Netherlands.
The shipments to Europe in the fourth quarter of 2021 were up more than 40 percent from a year earlier and more than double the pace in January 2021, according to the International Energy Agency.
Typically at this time of year, the tankers are delivering liquefied natural gas to Asia, said Niels Fenzl, vice president for transportation and terminals at Uniper Global Commodities, which imports gas through the Gate Terminal. “The market has turned, with the volumes flowing into continental Europe instead,” he added.
Because of these shipments, and because the winter has been mild so far, executives at Uniper, a large energy company based in Düsseldorf, Germany, say they are more comfortable that they have enough gas to last through the cold months, when consumption is highest.
They acknowledge, though, that a complete cutoff of Russian gas for more than a few days — something that most energy analysts consider unlikely — would be a stern test.
“We are not saying that the lights would go off or that people would be cold, but it would be an uncomfortable situation,” said Gregor Pett, executive vice president for market analytics at Uniper. “Even if you squeeze the last bit of capacity from the existing terminals, it would be tight,” he added.
While the liquid gas shipments have been an undoubted blessing for European homes, factories and power utilities, there are drawbacks.
Europe is paying a high price for this gas. Roughly 100 tankers just from the United States and Qatar were scheduled to arrive in Europe last month, at a cost of $8.5 billion, said Henning Gloystein, a director at Eurasia Group, a political risk firm.
These shipments have helped cool prices to less than half their highs in December, but gas futures on the Dutch TTF exchange are still selling for about $25 per million British thermal units, about five times prices in the United States.
The shipments may also be nearing their upper limits. Many European receiving terminals are at or near their capacity. A terminal like Gate can handle only around 11 ships a month, Mr. Adriaens said.
Weather permitting, a tanker can unload in a day, but the facilities for storing and reconstituting the fuel and sending it out into the gas grid are bottlenecks.
Until recently, there was little reason to pour money into larger facilities. Liquefied natural gas was something of an afterthought in Europe, with cargoes mostly going to Asian countries like Japan, South Korea and China.
A handful of countries in Europe do import substantial amounts of LNG, among them Britain and Italy, which has three terminals including one at Panigaglia near Genoa. Germany, Europe’s largest gas consumer, lacks a dedicated terminal but receives gas through Gate or other nearby terminals.
Industry insiders say that unlike container ships, which have faced enormous backups at some ports, gas tankers usually move in and out of terminals on schedule, not least because otherwise there can be losses to the valuable cargo.
“If you have waiting time, a little bit of the cargo boils off every day,” said Paul Wogan, chief executive of GasLog, a large operator of LNG vessels. “You really want to go straight into port,” he added.
Analysts also say the global liquefied gas industry is producing at close to its limits. There is room to send gas to Europe now because Asia is experiencing a warm winter, but that situation may not last.
“If cargoes are going to go to Europe, it means they are going to go away from other markets,” Mr. Cahill said.
