Europe’s internal market for electricity and gas is where the Green Deal will happen. The purpose of this ambitious program is to propel the post-Corona recovery and the ongoing decarbonization of Europe’s economies. Electricity and gas provide essential support for the expansion of renewables, the creation of a new hydrogen-based energy supply, and the efficiency and reliability of Europe’s energy supply. Electricity from renewable sources is already competitive. And processes currently under development will, in a few years’ time, make it possible to produce large quantities of green hydrogen.
Andreas Schierenbeck, CEO Uniper SE
Until then, low-carbon natural gas will continue to play a key role in spurring the energy transition. Between now and 2040, global demand for natural gas is expected to increase by about 45%. As a result, global competition for gas will become keener. Europe’s domestic production, however, will decline significantly. To close this gap and secure its future supply of gas, Europe must expand its import infrastructure.
Norway’s natural gas output will wane going forward. Groningen natural gas field in the Netherlands will run dry much earlier than originally planned, probably by 2023 or 2024. North Africa won’t be able to supply as much gas in the future because it will increasingly need to meet growing domestic demand. This leaves Europe with two secure options for satisfying its future gas needs: expand its LNG infrastructure and increase its imports from Russia, home to the world’s largest natural gas reserves. Uniper’s broadly diversified procurement portfolio encompassing as many supply sources and pathways as possible has proven its success for many years.
LNG enhances flexibility
LNG’s advantage is obvious: liquefying natural gas reduces its volume by a factor of roughly 600, which is why LNG can be transported by ship easily and safely. LNG trading gives companies like Uniper the flexibility to seize attractive opportunities on global natural gas markets. That’s why Uniper is significantly expanding its LNG activities worldwide. In addition, Uniper is partnering with other companies to develop Germany’s first LNG terminal, to be sited at the port of Wilhelmshaven on the North Sea. The terminal would be able to meet about one tenth of Germany’s natural gas demand.
Nord Stream 2 enhances supply security
The second key source of diversification and supply security is the expansion of, or participation in, gas pipelines that give Europe direct access to Russia’s abundant gas reserves. Two such pipelines are Nord Stream 1, which entered service in 2011, and Nord Stream 2, which is scheduled to open in early 2021. Uniper is one of the financing partners for Nord Stream 2, whose construction is currently in the final phase, with only a few kilometers remaining to the German coast.
Nord Stream 2 will significantly enhance the security of Europe’s gas supply and will be a necessary complement to its other transport pathways. Closing the growing import gap will require not only Nord Stream 2 but also the enhancement of Europe’s import infrastructure generally, for example through the construction of additional LNG terminals. Europe would be wise to consider the environmental, economic, and supply-policy advantages of a diversified gas procurement portfolio, which will continue to include the import of Russian gas. For decades, Russia has been a trustworthy and dependable supplier of energy products, such as natural gas to Germany and crude oil to the United States. This fact should not be overlooked amid the contentious political discussion regarding possible U.S. sanctions.