Source: Gasworld
Although not entirely carbon-free, LNG offers hard-to-abate sectors such as energy, shipping, and heavy goods vehicle (HGV) transport a way to mitigate their harmful emissions while investment and development of more sustainable energy infrastructure such as hydrogen continues to grow.
Europe has seen an LNG resurgence in recent times, following the onset of the Covid-19 pandemic causing a significant drop in European LNG imports in mid 2020 LNG recovered to normal levels in mid-2021.
A decline in domestic natural gas production combined with a near term 3% year-on-year increase in gas demand has seen Europe’s need to import gas skyrocket. As gas shortages and supply chain issues continue to affect the global market, this need is set to rise. By 2025, Europe is projected to account for nearly 15% of global LNG demand.
One major player involved in the exploration of Europe’s LNG capabilities is MET Group, an integrated European energy company with a substantial asset portfolio including gas-fired power generation, renewables and gas storage.
György Vargha, CEO of MET Group’s parent company MET International spoke with gasworld about its activities in the world of LNG regasification and importation.
“MET Group has considerable LNG regasification capacities in the Krk LNG terminal in Croatia to feed one of its most important regions with energy,” said Vargha.
“Furthermore, MET is an importer of LNG into its portfolios across the Mediterranean, including Spain, France, and Italy.”
The Krk terminal is a regasification terminal owned and operated by LNG Hrvatska on the island of Krk, Croatia. Its positioning allows for strengthening of the European energy market in addition to security the gas supply to EU countries.
As Croatia’s first LNG terminal, it has the capacity to send up to 2.6 billion cubic metres (bcm) per year of natural gas into the national grid. The €233m project uses a permanently moored floating storage and regasification unit (FSRU) and began its commercial operations on 1st January 2021.
The terminal is booked for the next three years, with MET Group utilising it as one of the terminal’s capacity holders with an overall capacity of 2.67bcm for a period of seven years.
“MET’s presence at the Krk terminal is very important for the Group as the top priority is to link the company’s portfolio in Spain, Turkey and the Mediterranean area to the global LNG market,” explained Vargha.
“LNG is good for Croatia and the entire region, in order to increase supply diversity.”
MET Group delivered its first LNG cargo to the Krk Terminal in April last year (2021) through subsidiary MET Croatia. Vargha considers MET’s presence at the terminal to be important for the Group as its top priority is to link the company’s portfolio in Spain, Turkey, and the Mediterranean area to the global LNG market.
“LNG is good for Croatia and the entire region, in order to increase supply diversity,” he added.
Growth of LNG and its advantages
MET Group’s natural gas trading arm MET International was formed in 2010 and, following a surge in growth within the LNG market, established its LNG trading desk in 2016.
This surge was spurred from heightened production capacity from new projects in Australia and the US.
Considering its tendency to produce fewer harmful emissions during production and combustion, the long-term outlook for LNG is bright. Oversupply issues have been contributed to by the ongoing Covid-19 pandemic, with country-wide lockdowns and suspension of industrial activity reducing demand in Q2 2020.
Heightened demand for LNG in Europe helped to balance the global LNG market in the first half of 2020, resulting in a current global demand figure for LNG standing at around 360m tonnes.
According to figures from the Shell LNG Outlook, global LNG demand is expected to reach 700m tonnes by 2040, in part due to the strong growth of natural gas in Asia.
The substantial growth is reflected by the shift towards more sustainable, lower carbon fuels as presented by the ongoing energy transition.
In addition to reported emission reduction properties, LNG has a substantially lower storage capacity requirement when compared with its sublimated equivalent, compressed natural gas (CNG). This is due to LNG having a volumetric energy density 2.4 times that of CNG.
LNG also presents greater safety potential by utilising double wall tank storage, in addition to being stored at low pressure (around 50 psi). Typically stored in a single wall tank, CNG is stored at much higher pressure (3,000 to 3,600 psi).
LNG, transport emissions and power
The use of LNG in long-haul transport by HGVs is claimed to have the potential to decarbonise a sector which is notoriously hard-to-abate.
When asked which LNG-related applications he finds most exciting, Vargha alluded to its use in transport, replying, “Long-haul transport and peak energy need in places without substantial energy infrastructure or renewable power production capabilities.”
Today, CO2 emissions from road freight account for around 9% of global CO2 emissions, emitting more than shipping and aviation combined, according to a study conducted by Shell. Diesel accounts for around 90% of the fuel used by these trucks, illustrating the need to shift towards alternative methods of powering freight such as LNG, hydrogen fuel cell electric vehicles (FCEVs) and battery electric vehicles (BEVs).
Regarded as ‘zero emission’ technology, FCEVs and BEVs are typically seen as an energy source that LNG will be used to transition towards. Perceived by some as a lesser evil alternative to diesel, LNG does deliver emissions savings. A study commissioned by Transport & Environment revealed that over a 100-year global warming potential (GWP) an LNG truck achieved a greenhouse gas (GHG) reduction of 7.5% compared to the tested diesel truck.
However, LNG for transport is not without its critics. According to Transport & Environment, when studied over a 20-year GWP time frame, the tested LNG truck was shown to produce more emissions than the diesel truck, resulting in 13.4% higher GHGs.
“These findings run contrary to the industry’s claims that gas-powered trucks constitute a viable ‘bridge technology’ which could deliver meaningful GHG reductions both in the short- and long-term,” stated the report.
The future of the market
Suitable for use across a range of industries, LNG is set to follow its overall trend of increased adoption over the next several years. Although likely to trend upwards, uncertainties caused by the increased potential for market volatility could present challenges.
“We will operate in an ever more volatile energy sector…”
With MET Group so heavily invested in LNG, Vargha expressed a pragmatic view of the challenges that could be faced going forward.
“We will operate in an ever more volatile energy sector – with climate risks, the ever-present threat of pandemics, and the knock-on economic effect on almost all sectors of the economy, all only adding up to this volatility,” he said.
“Power grids will be struggling with the surge of renewable production because it is too volatile: the weather is unpredictable and day production is very different to that produced at night. Therefore, Europe will need to solve power grid stability problems.”
The company intends to continue its growth story after a successful 2021, aiming to focus on growth in renewables generation and increase its sales market coverage in both natural gas and power, in addition to expanding its power and LNG trading quantities.
Vargha added, “We are also looking to expand through the acquisition of more physical assets, including those that provide synergies with our trading business. Our sales activity and asset strategy provide options for monetisation on the trading floor.”
Diversification and planning could prove to play a key role in Europe’s energy mix.
“The European energy transition needs careful consideration and long-term planning from the fuel mix to transportation and energy storage.”
“We need long-term planning, otherwise we will face adverse short-term consequences.”