France’s LNG buildout unnecessary amid falling gas demand, says IEEFA

In new research “France’s LNG Paradox,” the Institute for Energy Economics and Financial Analysis (IEEFA) has reported that France risks unnecessary investments in new liquified natural gas (LNG) infrastructure as the utilization rates of existing terminals decline and gas use falls.

IEEFA noted that the average utilization rate of France’s operational LNG import terminals was 60% between January and August 2023, down on last year’s rate of 74%, raising doubts about the need for the new floating storage regasification unit (FSRU) that recently arrived at the port of Le Havre.

With a regasification capacity of five billion cubic meters, Le Havre FSRU, chartered by TotalEnergies, is expected to be operational for the next five years.

In September 2023, environmental activists took steps to express their dissatisfaction with the arrival of the unit in French waters, and moreover, data from Disclose and Greenpeace France called into question the usefulness of the terminal for the energy independence of France and its European neighbors, aiming to show that the infrastructure is unneeded, even in the event of a cold winter.

• Eleven arrested after activists expressed their ire over arrival of TotalEnergies’ FSRU in France

Ana Maria Jaller-Makarewicz, Author of the report and an Energy Analyst at IEEFA, said: “Gas and LNG infrastructure is currently at risk from falling demand and high and volatile prices. If demand continues declining, France and neighboring European countries risk investing in gas infrastructure that will fail to improve security of energy supply and could become underutilized.”

“Although France has advocated for investing in projects that improve European security of supply while reducing Russian gas dependency, paradoxically Russian gas is finding an alternative way to reach French ports in the form of LNG.”

IEEFA said that while the stated aim of the Le Havre terminal is to partially offset the reduction or cessation of gas supplies from Russia, France continues importing Russian LNG and allowing transshipments destined for other markets.

Furthermore, under a 23-year deal signed in 2015, energy company Engie imports one million tons of LNG annually from Russia’s Yamal LNG project for transshipment at the Montoir-de-Bretagne terminal on France’s west coast, IEEFA stated, adding that Yamal LNG transshipments at Montoir-de-Bretagne increased 150% year over year in 2022, and 2023 is expected to follow that trend.

To note, IEEFA said that according to Kpler, the U.S. was the top exporter of LNG to France in 2022, followed by Russia, Algeria, Qatar and Nigeria.

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