Shale LNG “expensive” says IEA
4 Jun 2014
The cost of bringing US shale gas into Europe as Liquefied Natural Gas (LNG) is likely to be more expensive than current pipeline imports from Russia and Ukraine, the International Energy Agency (IEA) has warned.
Its report, World Energy Investment Outlook, published yesterday, claims that European countries looking to rebalance gas imports away from relying on their Eastern neighbours will have to do so at a price.
The IEA estimates that the cost of landing US shale gas on European shores would be around $12 per MBtu, “a price level that is higher than the current average price of pipeline imports to Europe, at $10-11/MBtu”.
Although shipping and import facility costs play a role, the IEA claims the key driver behind the higher price would be the fact that Europe would be competing with Asia to attract US shale gas imports, with gas prices on average far higher in Asian nations.
Last month Ineos won planning permission to build an ethane storage tank and LNG import terminal at its Grangemouth petrochemicals plant in Scotland, and is already building a similar facility at its Rafnes site in Norway.
In a promotional video, also released last month (see above), Ineos chairman Jim Ratcliffe claims importing US shale gas “should underpin European economics in chemicals for a long time to come”.
Declining refining
The IEA’s report also highlights the dire state of Europe’s refining industry, pointing out that since 2005, “about 2.9 mb/d of capacity has changed hands in Europe (about 18% of total) and about 2 mb/d has been closed”.
It blames “falling demand for oil products, declining local crude oil production, competition from imports and disappearing markets for export gasoline” as the key drivers behind this decline, which it expects to continue.
The IEA expects oil majors to continue to divest their European refining capacity and, like Wood Mackenzie’s analysis at the International Petroleum week in February, expects Russian and Asian companies to continue buying up the refineries to bolster their European presence.
