Europe builds regasification plants to triple expected gas demand: this is how it affects Gijón

The Russian invasion of Ukraine not only forced Europe to diversify its sources of supply, but also triggered a race to increase the continent’s energy sovereignty. Panic over gas shortages and rising prices, as the Kremlin turned supply into a weapon of war and cut pipeline exports to the continent, hastened the search for solutions. And one of them was the construction of new regasification plants, industrial facilities that return gas transported by ship to its gaseous nature in a liquid state. There would be nothing to object to this, if it were not for the fact that the capacity being built far exceeds the expected gas demand in Europe in the coming years. According to the Institute for Energy Economics and Financial Analysis (IEEFA), demand has declined by 20% since 2021.

The energy think tank assures in its latest report that gas consumption in Europe is set to fall to the lowest figure in the last ten years in 2023. This is good news for the climate, driven by the increased implementation of renewable energy, efficiency measures adopted in the EU, and an unusually mild climate. And it doesn’t look like this trend is going to change. According to IEEFA analysis, gas demand on the continent will peak in 2025 and decline steadily thereafter. A reality that collides with the explosion of regasification plants. Over the past two years, eight new ones have come into operation, while another four have expanded their capacity. And another 13 are expected to arrive before 2030.

According to experts, the decline in terminal usage will increase as the decade progresses.

“This means that the combined capacity of European liquefied natural gas (LNG) terminals could exceed expected demand by three times at the end of this decade,” says Anna Maria Zaller-Makarevic, IEEFA’s chief analyst for Europe. Last year, without any further measures, EU regasification plants operated at an average of 58% of their capacity. Eight of the 37 performed less than 50%. And it’s likely that underuse will increase as the decade progresses. IEEFA estimates that LNG demand will not exceed 135 trillion cubic meters (bcm) in 2030, leaving an unused capacity of 265 bcm.

According to experts, Spain is an example of what should not be done. With its seven regasification plants – including the plant in Gijón, which is used only as a warehouse – it is the country with the most capacity on the entire continent. But that’s also where they are used the least. In 2023, only 35% of its capacity was utilised, according to IEEFA, which is based on data from public and private institutions. This low use makes it unlikely that the El Mussel port plant, activated last year, will expand its use beyond gas storage for re-export. “Spain’s disproportionate LNG infrastructure could soon become a strategic disadvantage, given that peak demand could arrive as early as 2025,” says Jaller-Makarevic.

For the European taxpayer, this is not good news as construction costs for regasification plants can exceed €1,000 million, as has been the case with some new plants in Germany. “Since this is a regulated business, a good portion of the cost, as well as its maintenance, is passed on to consumers in the bill,” says Jaller-Makarevic.