Europe may have already seen peak LNG demand and a large part of its expanding LNG import infrastructure could become stranded assets by the end of the decade, the Institute for Energy Economics and Financial Analysis (IEEFA) said in a report on Thursday.
Total LNG imports in Europe fell by 20% year-over-year in the first half of 2024, according to IEEFA’s analysis. The institute includes the EU, the UK, Norway, and Turkey in the term ‘Europe’.
EU import fell by 11% in the first half of 2024 compared to the same period of 2023.
Despite the decline in LNG imports, many European countries continue to plan investments in new LNG import terminals. By 2030, IEEFA forecasts that this could result in more than 300 billion cubic meters (bcm) of unused capacity in Europe as demand is lower than the planned capacity and is set to drop by the end of the decade.
According to the institute, European demand for LNG is expected to drop by 11.2% this year to 148 bcm, “meaning the continent has likely already passed peak LNG consumption.”
LNG demand in Europe is further expected to drop to 93 bcm in 2030, IEEFA said.
Yet, countries in Europe persevere in building LNG import terminals as they are keen to avoid the energy crisis of 2022 when prices spiked, roiled the economies, and plunged millions of households into a cost-of-living crisis.
For example, Europe’s biggest economy, Germany, plans to have as much as 70.7 million tons per year of LNG import capacity by 2030, which will make it the fourth-largest LNG import capacity holder in the world. Germany plans to have a total of 10 FSRUs, some of which will be removed and replaced by onshore regasification facilities once they are built. The rush to have LNG import terminals as soon as possible will make Germany the fourth largest import capacity holder behind the major Asian LNG buyers South Korea, China, and Japan, analysts said last year.
IEEFA now says that Europe’s lower LNG imports and consumption have already reduced utilization rates at operational LNG import terminals.
The average utilization rate of the EU’s terminals fell from 62.8% in the first half of 2023 to 47.2% in the first half of 2024, IEEFA noted.
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By Tsvetana Paraskova for Oilprice.com
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