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Cool Britannia – a new LNG-import hub

Tue 18 Apr 2017 by Karen Thomas

Cool Britannia – a new LNG-import hub

The UK is at the forefront of plans to add new LNG-import capacity in northwest Europe, its three established terminals facing new competition from two new deepsea projects in the north of England that aim to store and sell on US export cargoes.  

Meridian LNG has extended its offtake agreement with Louisiana-based Magnolia LNG to supply a floating storage and regasification unit (FSRU) to Morecambe Bay. The deal extends an agreement signed two years ago, to supply 2 million tonnes a year to the FSRU.

LNG Ltd-owned Meridian has until December to close the offtake agreement. Höegh LNG is tipped to supply the FSRU to Barrow-in-Furness in the northwest.

And Trafigura is to reopen Teesside Gas Port in the UK northeast to LNG imports. The commodities giant is working with landowner PD Ports to secure permits for the project, aiming to receive the first shipments next summer and to develop the northeast terminal as a UK energy hub.

Trafigura will invest US$30 million in recommissioning the terminal and will charter an FSRU for the project. The venture aims to build UK re-exports. LNG reloading is new business for the UK, which shipped out its first LNG cargo just three years ago, as shown below.

The UK’s three established LNG-import terminals – Grain LNG in Kent and South Wales’ South Hook and Dragon LNG terminals – can import up to 35 million tonnes a year of LNG. However, industry sources say the UK uses just a third of its import capacity.

There are whispers, too, that Shell may divest its stake in Milford Haven-based Dragon LNG as part of its drive to consolidate its takeover of BG and to cut the merged company’s costs. Shell has not confirmed those reports.

In a recent study, BMI Research flagged up the UK’s growing role as an LNG hub as it reopens Teesside and adds new capacity as domestic demand increases. It expects the UK to import more LNG as its domestic gas production shrinks.

However, US exports will also make LNG cheaper and therefore more competitive compared to piped gas. And BMI expects the UK to increase its re-exports of LNG, as trading liquidity increases.

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