LNG in transport, 2020 the turning point
19 Feb 2020 - ConferenzaGNL
di Diego Gavagnin
In a recent parliamentary hearing, Snam, operator of the national gas pipelines, reported that the cost of LNG at the regasification terminals is now 3 euro / MWh lower than the Dutch gas hub, a European (and Italian) reference point which 16-17 euro MWh.
The LNG market is therefore very favorable in Europe today, even if the slowdown in Chinese purchases due to the coronavirus must be considered on the price trend. At the same time, the differential with oil is increasing, which is partly affected by the trend of world economies.
The LNG market is “long” now but it will still be for many years, as a consequence of the entry on the market of the Australian one, which looks to Asia, and the American one, which also looks at the Atlantic, whose production is breaking all records. In addition, unlike oil, the world LNG market sees a plurality of producers with a prevalence of “market economy” countries.
In this context, it is almost impossible to set up “cartels” such as that of OPEC for oil, which artfully keeps prices high with coordinated production reduction policies. In general, the market seems to be betting on a replacement of oil derivatives with natural gas in all possible uses, much faster than could have been imagined just a few years ago.
The price of LNG counts, but even more its lower environmental impact. Although, as the European Commission recommends in the European Green Deal, methane yes, but done well, without emissions and leaks, because it is also climate-changing. If used in engines, everything must be consumed, be it trucks or ships. In addition, hybrid LNG-electric vehicles and vessels are spreading, increasing the ecological advantage of liquid methane; next to the bioLNG, with neutral climate impact.
Italian private investors have noticed the situation, who have bet on LNG for heavy land transport, bringing Italy to the European service station record in 3 years: 81 with LNG AND L-CNG at the end of 2019, and another 4-5 are were inaugurated from January to today (it is no longer possible to keep track of). There are about a hundred tankers that distribute LNG at stations where more than 2,500 trucks are supplied, which grow with the growth of distributors.
A great entrepreneurial success, despite the very serious supply risks for which we totally depend on the Ventimiglia funnel, as operators who are left without LNG are well aware of the recent strikes in France (in the general indifference of politics).
The data of the developments in Italy are those of Ref-e, the energy economics research center, with which ConferenzaGNL has always collaborated, the sector’s reference point with its annual reports and half-yearly updates and correctness of the data. According to Ref-e, the cost of refueling trucks compared to diesel is 44% today.
Ref-e also foresees for 2023 the definitive affirmation of the sector, with the entry into service of the coastal LNG deposits under construction and being approved (Santa Giusta-Oristano, Ravenna, Marghera, Brindisi), in addition to the fundamental contribution that it may come from the adaptation of the OLT regasifier for refueling tankers, which in turn will be able to refuel both ships and coastal depots.
LNG ships, in this phase especially the “giant” cruise ships, have started sailing in the Mediterranean, with numerous stops in Italian ports. Those container ships will follow, but none of these can refuel LNG in our ports. The rules for usual activities in Northern Europe have been missing for about ten years and for two in the port of Barcelona. It can also be done in Marseille, as soon as some ships decide to dock there.
The central point remains the availability of coastal deposits and their cheapness, and for this it will be enough to see how the work is proceeding by 2020 (the first in the Tyrrhenian Sea will be completed by this year, the second, in the Adriatic, by next year ). This is the year of the turning point, because we are on the ridge between ascent and descent.
After that in heavy land transport, Italy has started to conquer the record of small-scale coastal deposits (between 9,000 and 30,000 cubic meters, the first to arrive), which other European countries do not currently need because they are equipped with regasifiers (with their large deposits) on the coasts and in ports, which can already supply tankers and tankers on their own.
Coastal depots are an intermediate step in LNG logistics, which implies an additional cost, compared to those who obtain their supplies directly from the regasifiers. If heavy land consumption increases at the current rate – the methanisation of Sardinia with LNG is important in this context – there will be a “quantity effect” such as to reduce this gap.
To see it, just get to December 31, 2020.