Gasunie talks about infrastructure investments in Europe’s gas industry

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Paul van der Laan, Manager Asset Exploitation & Business Development , Gasunie
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In this interview with Paul van der Laan, Manager Asset Exploitation & Business Development at Gasunie, we discuss the key role of infrastructure in the natural gas business in Europe.

Gastech News: In our previous conversation, you talked about cost challenges. How will Europe’s gas infrastructure investments evolve?

Paul van der Laan: I think in Europe, in general, the infrastructure is in place to facilitate the supply of natural gas to customers. Of course, there are some areas in Europe that lack interconnection and in some regions the gas market could evolve. But 80% of the European gas demand is supplied in well-interconnected markets. This doesn’t mean that new investments in infrastructure are not needed. Changing supply routes and sources, such as LNG, might require new pipelines. One example could be the additional Nord Stream pipeline which will have consequences for the infrastructure in Europe.

On the other hand, I think there’s room for optimisation of the existing infrastructure in Europe. By cooperation between the TSOs, you can optimise and reduce the need for new investments. You can see examples of this already in Germany where TSO are making use of each other’s infrastructure in an optimised way. I’m not pessimistic as a result of the current low energy prices. Low and high oil and energy prices have been seen in every decade, we’ve also had low prices in the 90’s and nevertheless we’ve invested in additional infrastructure. So I don’t think infrastructure as such is directly influenced by the price levels. It’s more about the security of those that are going to invest and that’s a changing environment.

In the past companies had long-term commitments for supply and sales. On that basis, it was also possible to make long-term commitments for infrastructure. In the changing business environment, we have short-term commitments for short-term booking capacity. Long-term investments or long-term commitments are becoming less common, which affects investment in infrastructure. You will see that those infrastructures that will be constructed generally will be related to new sources (LNG or import gas into Europe) and backed-up with a commitment of the seller.

Gastech News: If the new Nord Stream pipeline is built, what will be the impact on the market and how will U.S. LNG be affected by it?

Paul van der Laan: If you believe the market in Europe will stay at the current demand levels, you will see that, as a result of depleting indigenous sources, the market has to look for additional imports. It could be LNG or pipeline gas or a combination of the two. An additional Nord Stream pipeline would add 50-60 bcm to the European market. I think a combination of LNG and pipeline gas would be optimal. I don’t think Nord Stream 2 will bring that much additional gas into the market that it will stop parties from contracting LNG, the existing LNG infrastructure of around 200 bcm will be used.

Gastech News: Talking about the major markets for small-mid scale in Europe, what are Gasunie’s activities in terms of small scale LNG storage and distribution?

Paul van der Laan: In the Rotterdam area we have our GATE terminal together with Vopak which has been running since 2011. We are now working hard with contractors on installing a dedicated jetty for small scale ships. In Rotterdam, there is an excellent opportunity for companies to load small-scale vessels and with that distribute LNG for maritime usages all over Europe. This is a very important development. Apart from this, we’re interested in further developing small scale LNG hubs around the areas where this maritime energy is being consumed. Rotterdam will soon be covered but you can draw a line along the Dutch and German coastline and find out if there’s room for LNG small scale infrastructure to facilitate the maritime market. Small scale LNG in the maritime sector will replace heavy fuel oil because it makes sense from an environmental perspective and as it is a cost-effective in meeting new standards for the maritime sector. We believe this will be a growing market for the LNG sector.  Similar developments are taking pace in the road transport market; we see trucks running on LNG – cleaner and more silently.  The number of trucks in Europe that run on LNG is increasing. This is something we promote because we see that replacing diesel fuel with LNG is a better solution for reducing pollution. There is also another market for small scale LNG for “off-grid” purposes. We still have some areas that lack infrastructure for natural gas. In such isolated areas LPG or heavy fuel are used.

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Interested in meeting senior executives and management teams from the world’s largest gas and energy companies operating in Europe? Join Paul van der Laan at the European Autumn Gas Conference in The Hague, 14-16 November 2016.

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Photo Courtesy of Gasunie.