Decline in LNG demand may affect Greece's terminal projects
Following the initial shock of the energy crisis caused by the Russia-Ukraine war, LNG projects across Europe are being re-evaluated. Greece, which aimed to strengthen its infrastructure by building LNG terminals and becoming a regional gas supplier, may face setbacks due to reduced demand.
The Greek plan involved five terminals where LNG arriving by sea would be regasified and transported via pipelines to neighboring countries. However, this plan appears to be faltering due to delays in commissioning terminals and decreased LNG demand.
Currently, Greece's only operational LNG terminal is the Revithoussa land-based facility with an annual capacity of 7 billion cubic meters. According to data from Greece’s gas transmission system operator Desfa, the terminal received only 12 LNG tankers in the first half of this year, compared to 26 during the same period last year.
The commissioning of Greece’s second terminal and first floating storage and regasification unit (FSRU), located in Alexandroupolis, is uncertain, with delays causing doubt about whether it will start operations in October as Gastrade, the operator, had initially projected.
Greece Faces Demand Shortfall
Ana Maria Jaller-Makarewicz, Energy Analyst at the International Energy and Financial Analysis Institute (IEEFA), told AA that Greece, like other EU countries, aspires to be a key gas supplier for Europe. However, she noted that the demand for re-exporting gas is insufficient.
Jaller-Makarewicz pointed to Eurostat data, stating, "Greece's gas consumption increased by 31% year-on-year from January to May, while exports decreased. This is due to Bulgaria increasing its gas imports from Turkey. As a result, Greece’s LNG imports fell by 38% in the first half of 2024."
She highlighted that the Revithoussa terminal’s capacity is about 50% more than Greece’s recorded gas consumption of 4.7 billion cubic meters last year, and the terminal has sufficient spare capacity with a 24% usage rate this year to meet domestic demand and export to neighboring countries.
Jaller-Makarewicz noted that Alexandroupolis, with a capacity of 5.5 billion cubic meters, was initially planned to start operations by mid-June but this date has been postponed. The FSRU is expected to commence commercial operations in October. However, she pointed out that after the recent statement by the Greek Energy Minister about Greece's LNG receiving capacity being more than sufficient, the continuation of additional projects remains uncertain. These projects were intended to supply gas not only to Greece but also to Bulgaria, Romania, Hungary, Slovakia, Moldova, and Ukraine.
European LNG Demand Declines
Jaller-Makarewicz observed a contrary trend in EU gas demand, which was expected to recover this year. "European LNG imports continue to decline. In the first half of 2024, EU LNG imports dropped by 11% year-on-year to 60.1 billion cubic meters, and including the UK, Norway, and Turkey, there was a 20% decrease to 72.6 billion cubic meters. Natural gas and LNG demand is expected to continue decreasing in the coming years, raising questions about the need for new LNG terminals."
Russian Gas Preferred Due to Costs
Costis Stambolis, President of the South East European Energy Institute (IENE), explained that while the EU plans to end gas imports from Russia by 2027, this transition is challenging. He noted that Russian gas is significantly cheaper than LNG, stating, "Due to Gazprom’s price reductions, gas importing and distributing companies are favoring Russian gas over LNG. We have seen more than 50% of the gas imported to Greece in recent months come from Russia, a shift from 12-18 months ago. The cost issue is a significant challenge."
Stambolis added that Greece is preparing to launch its second LNG terminal after Revithoussa, with 2 or 3 more terminals planned. However, due to the drop in LNG demand, he believes that only one of these projects may be realized. He also mentioned that Alexandroupolis FSRU is currently undergoing tests and is expected to begin commercial operations in October. Another advanced project, Dioriga Gas, is also under consideration. While other FSRU units are well-supported and financed, their final investment decisions are uncertain and may be delayed or even canceled.
Stambolis noted that the initial expectation of having many FSRU terminals was unrealistic, as the goal was to serve the South East European market rather than just the smaller Greek market. The current low interest in LNG is attributed to the affordability of Russian gas.
He concluded that interest in LNG could fluctuate based on global developments and prices. Stambolis described having more LNG capacity as a "wise policy" due to its storability, contributing to energy security in Greece, which lacks underground gas storage. He emphasized the importance of regional cooperation for energy security, noting that Greece and Turkey could collaborate to strengthen energy security for the region and Europe. Turkey, which imports gas from sources like Azerbaijan, Iran, and possibly soon Iraq, also has substantial LNG capacity and could work with Greece to enhance energy security for South East Europe and beyond.
