Near the entrance to the vast port of Rotterdam in the Netherlands is a specialist port that offers an alternative to the network of Russian pipelines that feed much of Europe’s thirst for natural gas.
The facility, called Gate Terminal, is a critical entry point for liquefied natural gas, an increasingly vital fuel for Europe. This week, a giant tanker, the GasLog Glasgow, sat on a pier there, waiting for a winter storm to subside so it could unload liquefied natural gas from Egypt. Another gas-laden ship awaits its turn offshore.
“It’s very busy,” said Stefaan Adriaens, the terminal’s commercial director.
A year ago, he said, the terminal was operating at around 5% capacity. Lately, “we are running at 100% utilization”.
In recent months, the price of natural gas has soared in Europe, attracting a parade of liquefied natural gas tankers to ports like Rotterdam. The very high prices reflect the crimping of Russian gas supplies to Europe, the low level of fuel in the continent’s storage tanks and geopolitical concerns over Ukraine, where, according to the United States and its allies, the Russia could be preparing for an invasion.
Ships can carry huge amounts because, when cooled to minus 260 degrees Fahrenheit, natural gas reduces to a liquid that takes up only one-six hundredth of its volume as gas. Liquefied natural gas, known as LNG, is loaded onto ships and transported to any location with facilities to receive the chilled fuel and reheat it to a gaseous state.
A large fuel truck, about the length of three football fields, can contain a powerful infusion of energy – enough to light up to 70,000 homes for a year, according to an industry estimate.
Although GasLog Glasgow’s cargo comes from Egypt, a medium but growing gas powerhouse, most of the liquid gas going to Europe these days comes from the United States.
The long-awaited energy battle between Russia, for decades the main exporter of gas to Europe, and the United States, which for years has promoted its ability to export gas to customers, is finally playing out. Taking advantage of the abundance of gas from shale drilling, the United States has grown from almost nothing in the past six years to one of the world’s largest exporters of liquefied gas, along with Qatar and Australia.
“Many U.S. exporters have ramped up shipments to Europe over the past month or so,” said Ben Cahill, senior fellow at the Center for Strategic and International Studies, a research organization in Washington.
While experiencing rapid expansion, exporters whose shipments originate in the United States are also more likely than others to send their vessels to where they fetch the highest prices. The upshot is that, so far this winter, liquefied natural gas suppliers from the Gulf of Mexico and elsewhere have saved Europe from what could have been a dire situation even but for the standoff with Russia over from Ukraine.
Understanding Russia’s relationship with the West
Tension between the regions is rising and Russian President Vladimir Putin is increasingly willing to take geopolitical risks and press his demands.
The Biden administration is also relying on suppliers and their customers to help Europe.
Liquefied gas shipments have been unusually large and have even exceeded gas imports from Russia in recent weeks, according to Wood Mackenzie, an energy research firm. The increase highlights the “contribution of fuel to the security of gas supply,” International Energy Agency analyst Gergely Molnar told a webinar hosted by the international energy program Clingendael in the United States. Netherlands.
Shipments to Europe in the fourth quarter of 2021 were up more than 40% from a year earlier and more than doubled from January 2021, according to the International Energy Agency.
Typically at this time of year, tankers deliver liquefied natural gas to Asia, said Niels Fenzl, vice president of transportation and terminals at Uniper Global Commodities, which imports gas through the Gate Terminal. “The market has turned around, with volumes flowing more towards continental Europe,” he added.
Because of these shipments, and because the winter has been mild so far, executives at Uniper, a large energy company based in Dusseldorf, Germany, say they are more comfortable having enough gas to last through the cold months when consumption is highest. .
They acknowledge, however, that a complete cut off of Russian gas for more than a few days – which most energy analysts consider unlikely – would be a severe test.
“We’re not saying the lights would go out or people would get cold, but it would be an uncomfortable situation,” said Gregor Pett, executive vice president of market analytics at Uniper. “Even if you squeezed the last bit of capacity from existing terminals, it would be tight,” he added.
Although liquid gas shipments have been an undoubted boon to European homes, factories and electric utilities, there are downsides.
Europe pays a high price for this gas. About 100 tankers from the United States and Qatar alone were due to arrive in Europe last month, at a cost of $8.5 billion, said Henning Gloystein, director of Eurasia Group, a political risk firm.
These shipments have helped push prices down to less than half of their December highs, but gas futures on the Dutch exchange TTF are still selling at around $25 per million British thermal units, or about five times the prices in the United States.
Shipments may also approach their upper limits. Many European receiving terminals are at or near capacity. A terminal like Gate can only handle about 11 ships a month, Adriaens said.
Weather permitting, a tanker can unload in a day, but the means of storing, replenishing fuel and sending it into the gas network 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 shipments mostly destined for Asian countries like Japan, South Korea and China.
A handful of European countries import substantial quantities of LNG, including Britain and Italy, which has three terminals including one at Panigaglia near Genoa. Germany, Europe’s largest gas consumer, does not have a dedicated terminal but receives gas through Gate or other nearby terminals.
Industry insiders say that unlike container ships, which have faced huge backups at some ports, tankers generally get in and out of terminals on time, not least because otherwise there can be losses for the precious cargo.
“If you have time to wait, a small part of the cargo boils every day,” said Paul Wogan, managing director of GasLog, a large LNG ship operator. “You really want to go straight to port,” he added.
Analysts also say the global liquefied gas industry is producing near its limits. There is room to send gas to Europe now because Asia is experiencing a warm winter, but this may not last.
“If cargo is going to Europe, that means it’s going to move away from other markets,” Mr Cahill said.