ENTSOG TYNDP 2015

5.3.4.4 Liquefaction vs. regasification capacity

As shown in the next figure, in 2013 the regasification capacity was more than twice the liquefaction capacity. The difference between the LNG exporting and importing capacities is explained by: \\ The flexibility of the LNG market leads to LNG becoming a fuel of choice and re- gasification capacity being built in order to take advantage of low LNG prices. LNG is expected to be replaced either by other sources of gas or by other fuels when the LNG price is not competitive. \\ The use of LNG for managing demand variation by a combination of high regas- ification capacity and stock management. This is the case in the traditionally LNG dependent markets like Japan, South Korea or certain European countries like Portugal and Spain, where LNG constitutes a base-load fuel.

900 bcma

600

30

0

Liquefaction capacity

Regasification capacity

Atlantic Basin Pacific Basin Middle East

North America South & Central America Asia Pacific Europe and Eurasia

Figure 5.72: Liquefaction vs. Regasification capacity (Source GIIGNL 2013)

5.3.4.5 LNG as a market arbitration tool

The potential contractual right to change the destination of LNG cargos allows LNG to play an arbitration role between consumption areas. The price difference between markets can outweigh the extra costs of the maritime transport. The LNG market is a liquid market. According to the report of GIIGNL, 27% of the total LNG volume was traded on spot or on short term basis in 2013  1) , with the remaining 73% traded on a medium or long term basis. Strict destination clauses may still apply; however, re-loading of LNG has increased its flexibility. The inherent flexibility of LNG leads to a high level of uncertainty when defining the potential LNG import scenarios to Europe. This will not only depend on the availability of LNG and liquefaction capac- ity, but also on the evolution of the energy demand, the price of alternative gas sources and the price of alternative fuels, in these competing markets.

1) GIIGNL report 2013: “The LNG Industry”

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Ten Year Network Development Plan 2015