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More and more liquified natural gas facilities are being built around the worldImage: AP

EU's Fuel of the Future?

DW staff (sms)
June 30, 2007

With competition for energy resources continuing, some European energy experts who gathered in Germany called liquefied natural gas an emerging power source for the future of the EU -- for economic and political reasons.


As fossil fuel reserves dwindle, European energy suppliers are hoping to increase profits and meet growing energy demands by investing in liquefied natural gas (LNG).

"European energy supply companies have their backs to the wall," said Florian Haslauer, a consultant at A.T. Kearney, adding that he expected demand for LNG to triple by 2020. "They have to create access to LNG gas as fast as they can."

The European Union currently imports 28 percent of its gas from Russia and a further 12 percent from Algeria. LNG makes up just 7 percent of gas imported into the bloc, though many expect that to increase as energy companies invest in LNG infrastructure.

The June study produced by A.T. Kearney said European energy supply companies would have to spend about 25 billion euros ($33 billion) on LNG infrastructure over the next 13 years to meet energy needs.

Anlage Flüssiggas in Katar
Qatar has the world's third largest natural gas reservesImage: AP

Germany's Eon Ruhrgas announced earlier this month that it would expand its LNG operations with a 24.5 percent stake in a new LNG terminal expected to cost between 500 million to 600 million euros to be built in Le Havre by 2011. The company is also planning to invest an additional 500 million euros in a terminal in Germany's Wilhelmshaven, which is slated to open in 2011.

"LNG is an important factor for Europe's future energy supply security," Jochen Weise, a member of the Eon executive board said in a statement. "In an increasingly global gas market it will offer us good chances for additional growth."

Ease of transport

Currently used mainly to generate heat and electricity, LNG is created when natural gas is cooled to minus 160 degrees C. At that temperature the gas shrinks to a 600th of volume, making it possible to load onto tankers for long-distance trips.

Norway's Statoil, which is owned mainly by the Norwegian government, is hoping to achieve status as a key exporter of LNG. In May, it opened Europe's first LNG export terminal on the island of Melkoya. The island, which before being set up to export the liquefied gas was nearly uninhabited, has been loading LNG onto boats destined for Spain and the United States since May.

Schiff im Piratengewässer vor Singapur
The abilitiy to ship LNG long distances means the gas can be sold in more marketsImage: AP

Shipping the liquefied gas is more cost efficient than pipelines when the LNG travels over 3,000 km (1,864 miles), according to a February 2006 analysis by the Hypo-Vereinsbank.

Diversifying EU gas imports

Though transporting gas in a fashion similar to oil could be a first step to creating a world market for the energy source, which has been limited to regional sales until now due to the high costs of creating pipelines, it would not necessarily lead to diversification of EU energy supplies, according to a study by Andreas Goldthau of the German Institute for International and Security Affairs.

He pointed out that even by importing LNG, Europe would neither necessarily diversify its energy sources as Russia has the world's largest gas reserves, followed by Iran, Qatar, Saudi Arabia and the United Arab Emirates.

However even if Russian energy imports continued, a combination of market liberalizations and LNG imports would reduce Moscow's strategic importance as an energy producer, according to the German Institute for Economic Research in Berlin.

That would already be a step in the right direction, according to EU Energy Commissioner Andris Piebalgs who said that while he remained confident Russia would fulfill its energy contracts, the EU could use LNG to cushion the blow of "unpredictable developments" in the gas market.

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