Europe’s rush to LNG could turn into ‘world’s most expensive and unnecessary insurance policy’

Published

2 years ago

March 23, 2023

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A new floating storage and regasification unit considered crucial to Italy’s energy independence arrived in Tuscany on March 19, 2023. The Golar Tundra project is a key part of Italy’s plan to reduce its reliance on Russian gas following the invasion of Ukraine.

Filippo Monteforte | Afp | Getty Images

Europe’s rapid buildout of liquefied natural gas infrastructure is on track to far exceed demand by the end of the decade, according to new research, with more than half of the region’s planned LNG assets seen at risk of becoming idle.

The European Union has pledged to wean itself off Russian fossil fuels by 2027 in response to President Vladimir Putin‘s full-scale invasion of Ukraine, with many member states fast-tracking plans to bring in alternative sources of gas from countries such as the U.S. and Qatar.

Several countries including Germany, Italy, Greece, the Netherlands and France have announced new LNG projects or the expansion to existing ones in response to the shutdown of Russian gas pipelines.

The scramble to cover future energy needs, however, puts European countries at risk of wasting colossal sums of money, according to the Institute for Energy Economics and Financial Analysis.

Europe must carefully balance its gas and LNG systems, and avoid tipping the scale from reliability to redundancy.

Ana Maria Jaller-Makarewicz

energy analyst for IEEFA Europe

IEEFA, a U.S.-based think tank, said in research published Wednesday that Europe’s appetite for new LNG projects could massively outstrip demand in the coming years.

The continent’s LNG terminal capacity is set to exceed 400 billion cubic meters (bcm) by 2030, IEEFA said, citing current infrastructure buildout plans. This is up from 270 bcm at the end of last year. IEEFA included the U.K., Norway and Turkey in its analysis.

By contrast, demand for LNG across Europe is projected to range between 150 bcm, according to IEEFA, and 190 bcm, according to S&P Global Commodity Insights.

IEEFA said the mismatch between Europe’s future LNG demand and import facilities could result in 200 bcm to 250 bcm of unused capacity by 2030 — equivalent to roughly half the EU’s total gas demand in 2021, which was 413 bcm.

“This is the world’s most expensive and unnecessary insurance policy,” said Ana Maria Jaller-Makarewicz, energy analyst for IEEFA Europe and author of the analysis.

“Europe must carefully balance its gas and LNG systems, and avoid tipping the scale from reliability to redundancy. Boosting Europe’s LNG infrastructure will not necessarily increase reliability — there’s a tangible risk that assets could become stranded,” Jaller-Makarewicz said.

Risk of stranded assets

The highest risk of stranded assets was seen in Spain (50 bcm), Turkey (44 bcm) and the U.K. (40 bcm), while IEEFA said it expects a 36% utilization rate of Europe’s LNG terminals by the end of the decade.

A spokesperson for the European Commission, the EU’s executive arm, was not immediately available to comment.

Speaking earlier this month, the EU’s energy policy chief called on EU countries and companies to stop signing new contracts to buy Russian LNG as it seeks to reduce its energy dependence on the Kremlin.

“I encourage all member states and all companies to stop buying Russian LNG, and not to sign any new gas contracts with Russia once the existing contracts have expired,” EU energy commissioner Kadri Simson said on March 9, Reuters reported.

Several European countries including Germany, Italy, Greece, the Netherlands and France have announced new LNG projects or the expansion to existing ones in response to shutdown of Russian gas pipelines.

Michael Sohn | Afp | Getty Images

The EU’s big LNG capacity bet has also sparked environmental concerns, with research published late last year from Global Energy Monitor warning that plans to double the bloc’s LNG import terminal capacity threaten to derail climate goals while also doing little to address the energy crisis.

Analysts at GEM noted at the time that most of the LNG contracts secured by EU buyers were scheduled to start from 2026 and continue for 15 to 20 years.

To be sure, the burning of fossil fuels such as coal, oil and gas, is the chief driver of the climate crisis.

Environment

Crude prices jump as U.S. imposes sweeping sanctions against Russia oil industry

Published

3 hours ago

January 10, 2025

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Crude prices jump as U.S. imposes sweeping sanctions against Russia oil industry

A view of offshore oil and gas platform Esther in the Pacific Ocean on January 5, 2025 in Seal Beach, California.

Mario Tama | Getty Images

Oil prices jumped on Friday as the U.S. Treasury Department announced sweeping sanctions against Russia’s oil industry.

Brent gained $1.92, or 2.5%, to $78.84 per barrel by 11:12 a.m. ET, while U.S. crude oil advanced $1.89, or 2.56%, to $75.81 per barrel. Brent broke $80 per barrel for the first time since October earlier in day, hitting a session high of $80.75.

The sanctions target Russian oil companies Gazprom Neft and Surgutneftegas and their subsidiaries, more than 180 tankers, and more than a dozen Russian energy officials and executives. The sanctioned executives include Gazprom Neft CEO Aleksandr Valeryevich Dyukov.

The sanctioned vessels are mostly oil tankers that are part of Russia’s “shadow fleet” that has dodged existing sanctions on the country’s energy exports, according to the Treasury Department.

“The United States is taking sweeping action against Russia’s key source of revenue for funding its brutal and illegal war against Ukraine,” Treasury Secretary Janet Yellen said in a statement.

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Brent crude futures, 1 year

“With today’s actions, we are ratcheting up the sanctions risk associated with Russia’s oil trade, including shipping and financial facilitation in support of Russia’s oil exports,” Yellen said.

The perception in the oil market is Indian and Chinese refiners that have imported Russian oil will have to scramble for barrels from the Middle East, said Bob Yawger, executive director of energy futures at Mizuho Securities, in a note to clients Friday.

The Biden administration has sought to ratchet up pressure on Russia and dispense aid to Ukraine before President-elect Donald Trump takes office.

“The Biden administration opted for more robust energy sanctions, which caught the oil market especially complacent about sanctions risks,” said Bob McNally, president of Rapidan Energy Group.

“Therefore, we expect today’s material risk premium in Brent to stick pending signals from the Trump team as to whether they will continue these sanctions,” McNally said.

Don’t miss these energy insights from CNBC PRO:

Environment

This long duration compressed air energy storage project just got a $1.76B DOE loan

Published

4 hours ago

January 10, 2025

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This long duration compressed air energy storage project just got a .76B DOE loan

Hydrostor’s GEM A-CAES has received a conditional loan guarantee of up to $1.76 billion from the US Department of Energy (DOE) to build the Willow Rock Energy Storage Center, a cutting-edge compressed air energy storage (CAES) system, in Eastern Kern County, California.

If everything goes as planned, Willow Rock will bring 500 megawatts (MW) and 4,000 megawatt-hours (MWh) of long-duration energy storage (LDES) to the southern California power grid.

This system will lower energy costs, improve grid reliability during peak demand, and expand the rollout of renewable energy into the grid. Here’s how it works and why it’s unique.

How compressed air energy storage works

CAES technology is all about storing energy for later use, especially when the sun isn’t shining or the wind isn’t blowing. Here’s how it works:

Storing energy: The system takes surplus energy (often from renewable sources like solar or wind) and uses it to compress air, which is stored in underground caverns.
Releasing energy: When the grid needs power, the compressed air is released, passing through a turbine to generate electricity. Willow Rock will be able to dispatch stored energy at full power for over eight-hour periods.

Unlike conventional batteries, CAES can scale up based on the size of the storage cavern and doesn’t rely on scarce critical materials. It’s durable, too –systems like Willow Rock are designed to last over 50 years.

Why advanced CAES is different

Traditional CAES systems face two big challenges: wasted heat and inconsistent power output. Willow Rock’s advanced compressed air energy storage system (A-CAES) technology solves these problems:

Thermal energy capture: Conventional CAES loses around 50% of energy during the air compression process. Willow Rock pairs a proprietary thermal storage system with this process, so it captures, stores, and reuses heat from the compression cycle.
Constant Pressure: Traditional systems lose efficiency as underground air pressure drops. Willow Rock maintains consistent pressure by using water from an above-ground reservoir. As a bonus, the facility will be a net producer of fresh water, as water condensed during the compression process will be captured and reused.

This innovative design means A-CAES systems can be installed in a greater variety of underground conditions – an estimated 80% of US geology could support similar systems, opening the door for wide deployment.

Willow Rock will create up to 700 construction jobs at its peak, and 40 full-time operations roles will follow. These positions require skills similar to those used in the oil and gas industry, making it a natural fit for Kern County, a region with roots in fossil fuel production.

GEM A-CAES is a subsidiary of Hydrostor USA Holdings, a subsidiary of Hydrostor of Canada.

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Environment

BYD launches its ultra-compact ATTO 2 SUV in UK and Europe with Blade Batteries

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4 hours ago

January 10, 2025

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BYD launches its ultra-compact ATTO 2 SUV in UK and Europe with Blade Batteries

Chinese EV automaker Build Your Dreams (BYD) has unveiled its ATTO 2 compact SUV to the European public. The launch, which took place at the Brussels Motor Show, kicks off BYD’s next EV entry into European and UK markets. The BYD ATTO 2 is smaller and more affordable than its SUV siblings, with a decent range to boot, perfect for European roads.

The ATTO 2 is a rebranded version of the Chinese EV automaker BYD’s Yuan Up – an ultra-affordable compact SUV that debuted in China in February 2024. BYD may not be bringing “Yuan” branded EVs over to new markets in Europe, but that lineup continues to grow each month.

BYD currently sells four all-electric models in the UK and seven in Europe, including the ATTO 3 SUV. Today, BYD debuted a rebranded version of the Yuan Up called the ATTO 2, which will go on sale to customers in the UK and Europe next month.

BYD unveils ATTO 2 in Brussels, sales begin in February

The Brussels Motor Show recently kicked off as the first major automotive expo in Europe in 2025, and BYD showed up with a new affordable BEV option to complement the ATTO 3. Per BYD executive vice president Stella Li:

We’re excited to start 2025 with another important model for our plans in Europe. The B-segment SUV class is incredibly popular here, and with the ATTO 2, we have an agile and versatile offering that will appeal to that large potential customer base. It takes all of BYD’s strengths in batteries, electric motors and Cell-to-Body construction and combines them in a compact package that brings new intelligent technologies to the urban SUV class.

The ATTO 2 is 4,310mm long, 1,830mm wide, and 1,675mm tall—145mm shorter and 45mm slimmer than its ATTO 3 sibling. Despite its compact size, the ATTO 2 offers up to 1,430 liters of cargo capacity with its rear seat down.

The ATTO 2 also sits atop BYD’s e-Platform 3.0, the first of the brand’s compact SUVs to utilize Cell-to-Body (CTB) construction, which integrates the battery completely into the vehicle chassis—this design results in optimized space and overall increased vehicle rigidity.

Speaking of batteries, the EU and UK customers who opt for an ATTO 2 can experience BYD’s proprietary Blade Batteries, which integrates LFP cells directly instead of fitting them into multiple modules. BYD says customers can choose between two battery sizes in their ATTO 2 order. At launch, a standard range edition will utilize a 45.1 kWh Blade Battery, delivering a (WLTP) 312 km (194 miles) range.

However, BYD said a larger-battery version of the ATTO 2 will arrive in the coming months and offer drivers greater range. The automaker is not yet sharing individual pricing for the ATTO 2 in the UK or Europe. Still, a representative for the company said the compact SUV is expected to land between the BYD Dolphin and ATTO 3 BEVs, which in the UK cost 26,140 GBP ($32,157) and 37,140 GBP ($45,689) respectively.

ATTO 2 sales are expected to begin in February.

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