Could Brexit kill off LNG?

Malcolm Latarche
Malcolm Latarche

29 February 2016


Last Friday a new LNG bunkering facility was announced in the port of Klaipeda. Czech-based Chart Ferox and PPS Pipeline Systems Germany will build the plant which will comprise of five Chart cryogenic storage tanks providing 5,000m3 of LNG storage and which will be equipped with two loading areas for LNG trucks and jetty modules for ship bunkering. The LNG reloading station will be operational within 15 months with "full scope" delivery anticipated during the second half of 2017. The station’s regasification facility will have the capacity to provide 6000 Nm3/hour of natural gas. The plant design incorporates a potential for a future doubling of capacity. The main project aim is to develop Klaipeda as a Baltic hub and virtual pipeline to fuel ships and deliver LNG by truck to reduce the traditional dependence on imported pipeline gas. This is not the only project to increase the provision of LNG bunkering facilities underway in the EU and many more feasibility studies are underway. The take up of LNG as a marine fuel has generally been much slower than was both predicted and hoped for. That is a situation that has not been helped by the current low price of oil fuels including distillate alternatives to LNG, but which is mainly due to the perennial chicken and egg problem with owners not daring to commit until sufficient bunkering stations are available. In Europe, the EU has pushed the benefits of LNG and EU funds have been the seed capital for many studies and projects. However, the very real threat of an imminent departure of the UK from the EU and the not unlikely scenario of other countries following if the June referendum gives a loud no could choke off further funding. There is of course no reason why the EU should not continue with its plans, but the loss of €15Bn in net funding that comes from the UK will mean that funds available for projects that bring no immediate benefit will be severely limited. Until the bunkering facilities are available, owners may not be tempted to invest in gas-fuelled ships and the time lag in building new ships will mean most bunkering facilities will be underused or even unused for around two years – not a promising business case for private capital.