LNG Tankers Are Stuck Amid A Gas Crunch

Spain-based gas storage facilities are now complete. These are so full that many huge liquefied natural gas (LNG) tankers, which supply southern European EU member states with fuel, cannot unload cargo and have been stuck in a jam outside the port terminals on the coasts of Spain.

There are 15 gas tankers in Cadiz alone, per Spain’s TVE. Close to the Iberian Peninsula and around the Mediterranean Sea, about 35 gas ships are in waiting positions.

Not too far from Cadiz, Huelva is the home to a gas terminal where vessels that measure up to 300 meters in length can discharge cargo.

Spain has six terminals with plenty of connected depots. Another facility (the seventh one) will be put into operation in the Atlantic port of Gijon.

The LNG deployed ship transport is again converted to the gaseous state in the terminals. This can be further transported in pipelines.

Per Spanish gas grid operator Enagas, the country’s facilities reportedly hold one-third of the LNG storage capacity in the EU and about 45% of the bloc’s LNG regasification capacity. Yet even such an infrastructure is right now overburdened — with the outcome that the tankers have to turn away.

Weaker demands owing to mild weather

The demand has started falling as the weather is relatively mild. The reserves are at their peak, and economic activities have started slowing down, informed Pablo Gil, a Spanish analyst associated with the international brokerage company XTB. Energy-saving steps are making a significant impact.

There’s an evident imbalance between the planned supplies and demands in October, Enagas reported.

The situation in Spain isn’t an isolated scenario in Europe but is happening in other nations.

Enagas rightly predicted that the oversupply was likely to continue until November. This indicates that the tankers’ unloading dates would need to be postponed — until the storage capacities were once again freed up.

But not every tanker that is seen anchored off the coast has sold the cargo.

Some set sail from gas-exporting nations like the US, Nigeria, or Algeria without any fixed destinations. They are currently waiting for the rise in gas demand to fetch a more attractive price for the cargo.

James Waddell, energy expert, associated with the British consultancy company. Named Energy Aspects expected the demand to rise significantly with the arrival of the cold season. He said they might require more gas during the heating period in November, January, and December, and he informed DW.

At the moment, wholesale prices, which are subject to fluctuations, are relatively low, Waddell reported. However, that was likely to be altered again, he added, so the tankers’ wait would be worthwhile for gas traders. He also predicted higher gas prices in Europe in the coming winter.

New deals to plug the gaps in the pipeline network

Waddell further pointed out that a healthy interconnectedness of the European energy system could help to pass on excessive capacities, like those in Spain, to other nations. However, there are gaps in the pipeline network, for instance, between Spain and France.

Lisbon, Madrid, and Berlin have been campaigning to construct a high-performance gas pipeline named MidCat from the Iberian Peninsula to southern France. Paris has, however, resisted the channel due to doubts regarding its economic viability.

On Thursday, Spain, France, and Portugal mentioned that they would be building a sea-based pipeline for the transportation of hydrogen and gas between Marseille and Barcelona, substituting the plans to extend the MidCat pipeline across the Pyrenees that France opposed.

The route, dubbed by BarMar, will be used to pump green hydrogen and other renewable gases but will temporarily permit transportation of a “limited amount” of natural gas to alleviate Europe’s ongoing energy crisis, the Prime Minister of Portugal Antonio Costa mentioned.

References: DW, The Wall Street Journal

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Source: Maritime Shipping News