Revisiting LNG Projects in Greece Amid Energy Crisis
Following the initial shock of the energy crisis triggered by Russia’s war in Ukraine, Europe has begun reassessing its planned liquefied natural gas (LNG) projects. Greece, one of the nations aiming to strengthen its infrastructure through the construction of LNG terminals, has also set its sights on becoming a gas supplier for its region.
According to the LNG plan, gas will arrive by sea at a total of five terminals, where it will be regasified and then transported to neighboring countries via pipelines. However, Athens’ plans appear to be hindered by the non-operational status of some terminals and a decline in LNG demand, which struggles to compete with cheaper Russian gas.
Currently, the only operational LNG terminal in Greece is the Revithoussa facility, with an annual capacity of 7 billion cubic meters. Data from the Greek gas transmission system operator, Desfa, indicates that only 12 LNG tankers have arrived at the terminal in the first half of this year, down from 26 during the same period last year. It remains uncertain whether the Alexandroupolis terminal, the second in the country and the first floating storage and regasification unit (FSRU), will become operational in October as forecasted by its operator, Gastrade. Bulgartransgaz also holds a 20% stake in this project, which has already faced several months of delays.
Earlier this year, acting Energy Minister Vladimir Malinov even mentioned the potential participation of the Bulgarian company in a second LNG terminal.
Challenges in Demand
Greece is confronting the reality of insufficient demand. Ana Maria Yaler-Makarevich, an energy analyst at the International Institute for Energy Economics and Financial Analysis (IEEFA), highlighted that Greece, like other EU countries, is keen to become a key gas supplier for Europe but currently cannot re-export gas. She noted that demand is lacking.
Referencing data from Eurostat, Yaler-Makarevich stated, “Gas consumption in Greece increased by 31% year-on-year from January to May, while its exports have declined.” The decline in exports is attributed to Bulgaria increasing its gas imports from Turkey, resulting in a 38% year-on-year reduction in LNG imports from Greece in the first half of 2024.
She pointed out that the capacity of Revithoussa, the only operational LNG terminal in Greece, is approximately 50% higher than the country’s gas consumption of 4.7 billion cubic meters last year. The expert believes that the terminal will meet domestic demand and has sufficient spare capacity for exports to neighboring countries.
Yaler-Makarevich emphasized that Alexandroupolis, with an annual capacity of 5.5 billion cubic meters, was initially expected to start operations in mid-June, but this date has been postponed. Indicating that the FSRU is anticipated to commence commercial operations in October, she remarked that after the Greek energy minister recently stated that the country’s capacity to procure LNG is more than sufficient, it remains unclear whether additional projects will proceed.
Contrasting Trends in EU Gas Demand
In contrast, the situation regarding gas demand in the EU is expected to show some recovery this year. Yaler-Makarevich continued by observing that the import of liquefied natural gas into Europe is projected to rise.
Decline in LNG Imports to the EU
In the first half of 2024, liquefied natural gas (LNG) imports to the EU decreased by 11% year-on-year, totaling 60.1 billion cubic meters. This trend raises questions about the necessity for new LNG terminals, as demand for natural gas and LNG is expected to continue declining in the coming years.
Preference for Russian Gas
Kostis Stambolis, president of the Southeastern European Energy Institute (IENE), explained that the EU plans to halt gas imports from Russia by 2027, but this transition poses significant challenges. He noted that Russian gas is considerably cheaper than LNG in Europe, leading companies that import and distribute gas to favor Russian supplies, especially since the Russian energy company Gazprom has reduced prices.
Future LNG Terminals in Greece
As Greece prepares to launch its second LNG terminal, Stambolis indicated that two or three additional terminals are planned, but he believes only one will likely be realized due to the decreasing demand for LNG. Currently, the FSRU in Alexandroupolis is undergoing testing and is expected to enter commercial operation by October. Another project, named Dioriga Gas, is in an advanced stage and is considered one of the significant upcoming projects. Other FSRU units are well-supported and funded, backed by large corporations.
Investment Decisions and Regional Cooperation
Stambolis expressed uncertainty about whether final investment decisions will be made for these projects, suggesting that they may be postponed. He stated, “It was unrealistic to expect so many FSRU terminals to be operational from the outset.” He highlighted that the objective is to serve not only the Greek market, which is relatively small compared to Turkey’s, but also the Southeast European market. Currently, there is a lack of interest due to the low prices of gas.
Potential Changes in LNG Interest
Stambolis mentioned that interest in LNG could shift depending on global developments and pricing. He considered the availability of more LNG capacity as “smart policy” because it can be stored. In Greece, which lacks underground gas storage, the need for storage is partially met through FSRU and LNG terminals, contributing to energy security.
Importance of Regional Energy Security
Stambolis also emphasized the significance of regional cooperation for energy security, stating, “Strengthening energy security is not merely a national issue; it has immense regional implications.” He pointed out that Greece and Turkey could collaborate to enhance the energy security of the region and Europe, as Turkey plays a vital role in the energy landscape due to its access to both Russian gas and significant quantities from other sources, such as Iran and potentially Iraq in the near future. Turkey also possesses substantial LNG capacity, which, in collaboration with Greece, could bolster energy security for Southeast Europe and beyond.
