Brimming European LNG terminals lack room for more gas

Storage tanks at the Dragon Liquefied Natural Gas (LNG) facility at Waterston, Milford Haven, Pembrokeshire, Wales
Storage tanks are seen at the Dragon Liquefied Natural Gas (LNG) facility at Waterston, Milford Haven, Pembrokeshire, Wales, Britain, September 20, 2021. REUTERS/Rebecca Naden

LONDON/MADRID, Feb 17 (Reuters) - Europe's liquefied natural gas (LNG) terminals have limited available capacity to absorb extra supply from the United States or other major producers in the event gas from Russia is disrupted if it invades Ukraine.

Concerns have mounted that Russia, which provides around a third of Europe's gas, is preparing to invade Ukraine. Russia has repeatedly denied it plans an invasion.

The U.S. administration in January asked major energy producers such as Qatar whether they can send extra LNG to Europe.

At least half of U.S. LNG shipped this month has gone to Europe, Refinitiv data shows, with Europe poised to remain the top destination for U.S. shipments for the third month in a row. read more

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LNG imports to the continent remain robust. After hitting a record high in January of more than 16 billion cubic metres (bcm), they have so far reached 6.9 bcm in February.

This means most of Europe's LNG terminals are operating at full capacity, especially in north-west Europe, where they feed large economies Britain, France and Germany, raising the question of how much more LNG can be processed.

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"A few cargoes could be squeezed into some other countries, but not significant supply," said Rystad Energy senior analyst Kaushal Ramesh, adding that logistical issues are likely to "burn a hole through buyers' pockets, again".

LNG needs to be regasified by transforming it from its frozen state back to gas and then transporting it through pipes - either directly for burning or to generation plants to make electricity.

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Spain has the continent's biggest capacity, with six terminals, while Germany has none. The utilisation rate for the Spanish terminals was just 45% in January, data and analytics firm Kpler said.

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"The problem with Spain is that it has limited pipeline connections with the rest of Europe with only one pipeline that could take gas from Spain to France and so capacity is restricted somewhat," Laura Page, senior LNG analyst at Kpler said.

A European industry source, speaking on condition of anonymity said Iberian infrastructure could play a role if there were insufficient of gas for heating or for industry, but it would not be enough to address the shorfall.

Another option would be to park LNG vessels in Iberia.

"In (the Portuguese port of) Sines, maybe we can try to have a few more methane vessels than today, but not many more because it's almost fully operational," the source said.

Reporting by Marwa Rashad in London and Isla Binnie in Madrid, additional reporting by Sergio Goncalves in Lisbon; Editing by Nina Chestney, David Evans and Barbara Lewis

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