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Shipping liquefied natural gas has become Europe’s solution to boosting its energy security

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On a barge floating off the coast of Estonia, workers are laying a high-voltage electric cable along the sea bed.

It powers a terminal that will receive deliveries of liquefied natural gas, or LNG, that has been cooled to about minus 160 degrees Celsius.

The energy source will then be converted back into gas and piped out to the other Baltic states and Finland, which no longer get their supply from Russia following its invasion of Ukraine.

Shipping natural gas in this manner has become Europe’s solution to boosting its energy security, amid unreliable natural gas supply from Russia and impending sanctions against the import of oil from Russia.

BUILDING THE LNG TERMINAL
However, putting the offshore terminal to use has not been straightforward due to the challenging conditions.

“If the sea is too rough, we simply can’t execute from a safety point of view,” said Mr Mindaugas Zakaras, who is in charge of the building of key infrastructure like the electric cable.

Mr Zakaras, from engineering firm MT Group, noted that the ongoing works are in the open Baltic Sea, where the weather conditions at this time of the year are mostly bad.

“We are, most of the time, preparing when the bad weather is there, and when we have a timeframe of good weather, we basically execute the works from the good weather window to the next good weather window,” he said.

The project is part of Europe’s strategy to quickly wean itself off natural gas from Russia, typically relied upon to heat homes and power factories.

RUSSIAN OIL PRICE CAP
This comes amid impending European Union’s sanctions against Russian oil imports.

A sanctions package adopted in June prohibits the purchase, import or transfer of crude oil and certain petroleum products from Russia to the European Union (EU). The restrictions were expected to begin from Dec 5 for crude oil, but may instead be replaced by a price cap on Russian seaborne crude oil.

The move is expected to reduce the likelihood of crude oil prices soaring after the sanctions kick in, and also safeguard global oil supply as Russia produces 10 per cent of the world’s oil.

According to Reuters, as of Thursday (Dec 1), the EU was close to dealing on a US$60 a barrel price cap.

Estonia rejected the previous price proposal from the Group of Seven (G7) of US$62, saying instead that it should be closer to Russia’s production costs of an estimated US$20 to US$25 per barrel.

RUSSIA’S SOLUTION
In response to sanctions by the West on its energy sector, Russia has started shipping more of its oil and coal to countries like India and China.

But when it comes to natural gas, it is not that simple.

Professor Igor Yushkov of Financial University in Moscow said “it will not work” to simply redirect the gas supplies that used to enter Europe through pipelines, to LNG plants and then to Asia.

Even the capacity of gas liquefication plants is not sufficient,” he said. “And in this regard, it is necessary to build new facilities in order to shift it to Asian markets.”

While imports of natural gas carried into the EU by pipelines have fallen dramatically, the bloc’s imports of Russian LNG have gone up by almost 50 per cent year-on-year in 2022.
Source: CNA



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