Liquefied natural gas
The EU is the biggest importer of natural gas in the world. Diversification of supply sources is therefore paramount both for energy security, as well as for competitiveness.
Liquefied natural gas - known as LNG - is natural gas, predominantly methane that has been converted to liquid form for ease of storage or transport.
The liquefaction process involves cooling the gas to around −162 °C and removing certain impurities, such as dust and carbon dioxide. As a liquid, LNG takes up around 600 times less volume than gas at standard atmospheric pressure. This makes it possible to transport the gas over long distances, without the need of pipelines, typically in specially designed ships or road tankers.
When it reaches its final destination it is usually re-gasified and distributed through gas networks – just like gas from pipelines. LNG is also increasingly used as an alternative fuel for ships and lorries.
Importance of LNG for the EU's security of supply
Ensuring that all Member States have access to liquid gas markets is a key objective of the EU's energy union strategy. LNG can give a real boost to the EU's diversity of gas supply and hence greatly improve energy security. Today, the countries in Europe that have access to LNG import terminals and liquid gas markets are far more resilient to possible supply interruptions than those that are dependent on a single gas supplier.
Cargoes of LNG are available from a wide variety of different supplier countries worldwide, and the global LNG market is undergoing a dynamic development with the entrance of new suppliers such as the United States, Russia and Australia.
In 2019, 14 Member States imported a total of 108 billion cubic metres (bcm, gas equivalent) of LNG, 75% more than one year earlier. LNG imports made up 25% of total extra-EU gas imports in 2019. The biggest LNG importers in the EU were Spain (22.4 bcm), France (22.1 bcm), the UK (18 bcm), Italy (13.5 bcm), the Netherlands and Belgium (8.6-8.8 bcm).
Consumption and demand
Natural gas currently represents around a quarter of the EU's overall energy consumption. About 26% of that gas is used in the power generation sector (including in combined heat and power plants) and around 23% in industry. Most of the rest is used in the residential and services sectors, mainly for heat in buildings.
The EU's gas demand is around 485 billion cubic metres (bcm) and, based on current policies, is projected to remain relatively stable in the coming years. Domestic gas production is expected to decline, which is likely to have an impact on gas imports.
At the same time, however, further policies designed to achieve 2030 energy and climate targets – notably those in the Clean energy for all Europeans package, such as energy efficiency improvements in heating and industry – are likely to see a drop in overall gas usage across the EU.
Production and imports
Less than 25% of the EU's gas needs are currently met by domestic production. The rest is imported, mainly from Russia (31 %), Norway (28%), and Algeria (5%), beyond LNG sources, as 2019 annual data shows.
In recent years the share of LNG has measurably increased, accounting for around 25% of imports in 2019, with most of that coming from Qatar (28%), followed by Russia (20%), the United States (16%) and Nigeria (12%).
Qatar is currently by far the world's largest supplier of LNG, at around 170 bcm. Other large (>20 bcm) suppliers include Australia,the United States, Nigeria, Malaysia, Russia and Indonesia. Global liquefaction is set to further increase dramatically as new plants in the United States and Australia come on stream over the next few years.
The EU's overall LNG import capacity is significant – enough to meet around 45% of total current gas demand. However, in the region of south-east of Europe, central-eastern Europe and the Baltic, many countries do not have access to LNG and/or are heavily dependent on a single gas supplier, and would therefore be hardest hit in a supply crisis. It is important to make sure that such countries have access to a regional gas hub with a diverse range of supply sources, including LNG.
With any new infrastructure, commercial viability is very important. For a LNG terminal, its utilisation across a whole region, or the choice of lower cost and more flexible technologies, such as floating storage and regasification units (FSRUs), may considerably improve its viability.
In principle, LNG terminals, as with other energy infrastructure, should be financed through end-user tariffs (investment is paid for by all gas consumers as part of their monthly gas bill) or in some cases gas companies bear the costs of construction (the investment is borne by a number of companies in exchange for the right to use the terminal through long-term capacity booking). But even with a sound business case, financing may still be a challenge in some cases.
For projects that are particularly important for security of supply, EU funds, such as the Connecting Europe Facility could potentially help fill the financing gap. EIB loans, and the European Fund for Strategic Investments (EFSI), may be another sources of long-term financing.
- Factsheet: EU-U.S. LNG TRADE U.S. liquefied natural gas (LNG) has the potential to help match EU gas needs (January 2020)