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LNG tankers stuck amid gas crunch

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Madrid, Oct 21: Spain's gas storage facilities are full. So full, in fact, that several huge liquefied natural gas (LNG) tankers that supply the southern European EU member state with fuel are unable to unload their cargo and are stuck in a jam outside port terminals on Spain's coasts.

There are 15 gas tankers in the bay of the southern Spanish Atlantic city of Cadiz alone, according to Spain's public television station TVE. Around the Iberian Peninsula and in the Mediterranean Sea, at least 35 gas ships are said to be in waiting positions.

LNG tankers stuck amid gas crunch

Not far from Cadiz, the port city of Huelva is home to a gas terminal where ships up to 300 meters long can discharge their cargo. Spain has a total of six terminals with connected depots. A seventh facility will soon be put into operation in the Atlantic port of Gijon.

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In the terminals, the LNG used for ship transport is converted back to its gaseous state so that it can be transported further in pipelines.

Overloaded infrastructure

According to Spanish gas grid operator Enagas, the country's facilities hold one-third of all LNG storage capacity in the EU and 45% of the bloc's total LNG regasification capacity. However, even this infrastructure is currently overburdened — with the result that tankers have to be turned away.

LNG tankers stuck amid gas crunch

There's an unexpected reason for the tanker congestion: In light of concerns about an energy shortfall in the wake of the Russian war in Ukraine, Spanish energy companies increased their gas orders in the spring and summer.

As a result, more and more LNG tankers have been arriving in Spain in recent months. From January to the end of September, over 250 giant tankers were unloaded in Spain — as many as during the whole of last year.

But at the same time, demand for gas in the country has fallen. According to Enagas, Spain consumed almost 7% less gas in September than in the same month last year.

Weaker demand due to mild weather

"Demand is currently falling because the weather is still relatively mild, reserves are at a peak and economic activity is slowing," said Pablo Gil, Spanish analyst at international brokerage firm XTB. Energy-saving measures are also making an impact.

"There is an imbalance between planned supplies and demand in October," Enagas said. "This situation in Spain is not an isolated case in Europe, but is also happening in other countries."

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Enagas predicted that this oversupply was likely to continue until November. That means the tankers' unloading dates would have to be postponed — until storage capacities were freed up again.

But not all tankers anchored off the coast have already sold their cargo. Quite a few set sail from gas exporting countries such as the US, Algeria or Nigeria without a fixed destination and are now waiting for the gas demand to rise again so that they can obtain a more attractive price for their cargo.

James Waddell, energy expert at the British consultancy firm Energy Aspects, expected demand to increase significantly with the cold season: "We will need more gas in the heating period in November, December and January," he told DW.

LNG tankers stuck amid gas crunch

At the moment, wholesale prices, which are subject to wide fluctuations, are at a comparatively low level, Waddell said. But that was likely to change again, he added, so the tankers' wait could be worthwhile for gas traders. He predicted "much higher gas prices in Europe" in the winter.

New agreement to plug gaps in pipeline network

Waddell pointed out that a good interconnectedness of the European energy system could help to pass on excess capacities, such as those in Spain, to other countries. But there are still gaps in the pipeline network, for example between Spain and France.

Madrid, Lisbon and Berlin have long been campaigning for the construction of a high-performance gas pipeline, dubbed MidCat, from the Iberian Peninsula to southern France. Paris, however, has resisted the pipeline because of doubts about its economic viability.

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On Thursday, however, Spain, Portugal and France said they would build a sea-based pipeline to carry hydrogen and gas between Barcelona and Marseille, substituting plans to extend the so-called MidCat pipeline across the Pyrenees that France had opposed.

The route, dubbed BarMar, will mainly be used to pump green hydrogen and other renewable gases, but will also temporarily allow for the transportation of a "limited amount" of natural gas to help alleviate Europe's energy crisis, Portuguese Prime Minister Antonio Costa said.

Source: DW

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