LNG

Gazprom shareholders have just held their annual general meeting and despite Western sanctions wiping out profits in the past year and leading to a net loss, one of the world’s largest gas companies has started rebuilding new markets to replace the European Union.

Denmark, the European Union nation with LNG, pipeline gas and renewables power trading players in Copenhagen, said it had officially exited the gas crisis caused by the Russian invasion of Ukraine by persuading citizens to use less gas.

Denmark, the pipeline natural gas and power market player involved in LNG trading and a bridge supplier of gas to Poland on the Baltic Pipe, has opened a “mini tender round” for interested oil and gas companies who can apply for a licence for a concession in the North Sea.

Norway’s Equinor, an LNG supplier to the European Union and which has enabled some of the replacement of pipeline natural gas to Europe in the past year, has opened the Njord field in the Norwegian Sea.

Denmark and Sweden, whose electricity systems have been interconnected for more than 100 years, have signed a natural gas supply agreement to be implemented in case of emergencies with the Danes pledging to supply Swedish essential services with gas.

The Nordic nations have entered into a “solidarity agreement “ on gas supplies signed by the Director General of the Swedish Energy Agency, Robert Andrén, and the Director of the Energy Agency of Denmark, Kristoffer Böttzauw.

“The agreement will come into force if an emergency situation arises, where the energy crisis escalates and gas shortages occur in the coming winters,” said a statement.

“In that case, Denmark will contribute to securing the supply of the protected customers in Sweden. This applies, for example, to households, hospitals, emergency services and other critical functions,” according to the agreement.

Small-scale LNG

While Sweden is a small-scale LNG importer of around 400,000 tonnes per annum for bunkering fuel and other uses, Denmark has the key pipeline links to North Sea natural gas supplies.

Andrén, the Sweden’s Energy Agency head, explained that their energy systems were complex and connected to several countries.

“The agreement shows the strength of international cooperation, especially for security of supply, where the benefits of cooperation are obvious,” added Andrén.

The backbone of the regional gas infrastructure is the Danish transmission system, which transport natural gas from the North Sea to distribution networks on land.

Danish state-owned firm Energinet operates the transmission system in Denmark and the system is also the route to Germany and Sweden and to the two Danish gas storage facilities, which are consolidated in a separate company owned by Energinet.

“The agreement we have signed reflects the great work and cooperation that has taken place in the wake of Russia's invasion of Ukraine - not just in the Nordic region, but throughout the European union,” said Kristoffer Böttzauw, director of the Danish Energy Agency.

Team work

“No country in the EU or the Nordics can solve the energy supply crisis alone. So we must cooperate and be in solidarity with our neighbours - both when it comes to supply chains and energy savings,” added Böttzauw.

The Danish and Swedish sides noted that Russia's invasion of Ukraine has strained gas supplies across Europe causing large fluctuations in energy prices.

“Although electricity and gas prices have fallen since the summer of 2022 and the European gas storages have a very high degree of filling, there is still a lot of work to be done to ensure security of supply,” they said.

“The solidarity agreement shows the effect of the strong Nordic cooperation to ensure security of supply, where both countries benefit from close cooperation in both the electricity and gas fields,” they added. 

Shell UK has taken the final investment decision to develop the Jackdaw natural gas field in the UK North Sea following regulatory approvals granted earlier in 2022 and the gas volumes when brought on stream will slightly lessen LNG needs.

Norwegian oil and gas company Equinor, the leading producer and exporter of West European pipeline natural gas and LNG, has brought on stream the third stage of the Troll gas field, extending the production lifespan beyond 2050.

Nord Stream AG, the natural gas pipeline company for the Russia-to-Germany Nord Steam I Pipeline, one of the main competitors to LNG, will temporarily shut down both lines of its system for routine maintenance for 10 days, starting today.

The body representing German pipeline operators has issued its network development plan for gas from 2020-2030 and is preparing for the arrival of LNG cargoes in addition to pipeline supplies from Russia and Norway.

“The additional measures compared to the previous gas network development plans are largely in place in connection with the supply of Baden-Württemberg, the connection of the LNG terminals and the necessary expansion measures for ‘green gases’ and security of supply in the Netherlands,” said the German Association of Transmission System Operators (FNB) in its report.

The Germans form Europe’s biggest natural gas market after the UK and the nation is an importer of more than 90 percent of its needs.

It receives Russian natural gas via Ukraine and Poland and from the Nord Stream 1 pipeline across the Baltic Sea for onward distribution to other EU countries in the region.

Germany will additionally be joining the LNG market by 2022 with volumes from North America and elsewhere with regasification and import terminals planned for on onshore Elbe River terminal at Brunsbuettel near Hamburg and a floating storage and regasification unit at the North Sea port of Wilhelmshaven.

“For the bottleneck analysis in the Germany-wide Trading Hub Europe market area, over 51,000 individual load cases per calculation year are used,” it added.

“In the considered scenarios with different characteristics of forecast market shifts there are significant variations in the different
sources of gas from Russia, Norway and LNG,” stated the FNB.

“The transmission system operators provided results for the Gas 2020–2030 network development plan, including information obtained through public consultation and thus meet the requirements of the Energy Industry Act and the Gas Network Access Ordinance,” explained the FNB.

In the scenario framework, there are two possible outcomes for the development of gas demand in Germany up to the year 2030.

These scenarios take into account the current European climate protection goals.

With a network extending approximately 40,000 kilometres in length, the German transmission system operators form the backbone of the entire gas transport system in Germany.

The distribution system for natural gas that is fed by the transmission system is more than 470,000km long.

The existing gas infrastructure can make a significant and economically valuable contribution in the energy system of the future.

Gas itself is a climate-friendly source of energy and can become completely climate-neutral. The gas infrastructure opens up the opportunity to transport very large quantities of renewable energy as well as to store it long term.

Through the integration of “green gases” in the existing infrastructure, it is noted that a significant contribution can be made swiftly and cost-efficiently to the reduction of CO2 emissions.

“The transmission system operators also have plans for a hydrogen network based on the market needs and fleshed out by 2030,” said the FNB.

“These plans are a first step towards a national one and prospective European hydrogen network,” it added.

It was noted that it would seem to make sense to put this infrastructure to work in the future to transport “green gas”, i.e. climate-neutral gas obtained from biogas or generated synthetically from renewable electricity in the form of hydrogen or methane.

LNG facilities should also be taken into consideration “in competition for planning purposes” so that the networks are not designed to be able to take over further capacity from LNG facilities in addition to any takeover of the network entry points.

Furthermore, LNG facilities are likely to be in competition with each other.

The design of the rival marketing will enable capacity that is not nominated or not booked in the short and medium term to be used at the rival points.

The proposed rival planning is intended to allow the LNG facilities to maintain freely allocable capacity.

“The overall comparatively low cost of using market-based instruments in the gas marketing year, from the perspective of the transmission system operators, do not offer sufficient justification for an alternative Network expansion,” said the FNB.

“In terms of a needs-based network expansion, an evaluation of possible structural measures should be carried out for the period after the gas business year 2025-2026 as an alternative to the use of market-based instruments,” it added.

Natural gas supplies about 24 percent of Germany’s energy needs today, a figure that rises to 45 percent for heating and gas beats electricity by more than a factor of four.

The gas network also has substantial storage capacity, as it has to cope with significant seasonality.

Average gas consumption in February is more than three times greater than in August.

To meet the spike in demand in winter, Germany has gas storage volume of around 260 terawatt hours, enough to cover peak demand for more than two months without additional supply sources.

Samskip, a Dutch shipping company based in Rotterdam and owner of two LNG-powered multi-modal vessels, and Gasum of Finland have signed an accord for the ships to be refuelled at the Gasum-owned small-scale liquefaction plant at Risavika in Norway.