Project motivation
EU's energy policy puts renewable energy sources at the centre of efforts towards ensuring sustainable, secure and affordable energy for the Community. Roadmap to 2050 indicates that, in order to achieve the overall reduction of emissions by 80% by 2050, electricity production in Europe will have to be virtually carbon-free.
On a path towards zero carbon emissions, there will be a transitional period during which the whole energy system will have to become more efficient. In order to bridge the gap between the energy system today and the carbon-free energy system of the future, methane might prove to be of paramount importance
in accompanying the transition scenarios and orientating producers towards efficient distributed generation sources, more suited to the characteristics of the changing system. It would also allow a significant reduction of CO2 and other greenhouse gases, therefore helping to reach the targets set by the European climate directives more quickly.
High-medium Adriatic gas market
Current demand for methane in the Adriatic Sea (Veneto - Friuli Venezia Giulia - Slovenia - Croatia) is estimated at around 15-17 billion cubic meters annually as the average value during the last five years.
In the European Carbon Free 2050 transitional hypothesis, methane requirements are estimated between 22-24 billion cubic meters per annum. This estimate also considers the progressive replacement of other fossil fuels in industrial uses, the production of electricity and the application of European directives on energy efficiency of the current system.
Adriatic LNG on the map
Basic premises
Adriatic LNG project is in line with the European context of energy policies – COP21 Paris and Road Map Europe Carbon Free 2050. Europe’s decision to choose methane as a source of fossil fuel over coal inevitably causes a stronger need for supply diversification where liquefied natural gas (LNG) has a crucial role to play.
LNG infrastructure projects are capital-intensive, involve a considerable amount of players and are of strategic, national and regional importance.
Location close-up
Due to these reasons, they are considered as projects of public interest. As such they are within the scope of the Investment Plan for Europe, known also as the Juncker Plan, where public-private partnership (PPP) projects are of particular interest.
Advantages of LNG
Favourable eographic position of the Adriatic Sea makes this macro-region able to acquire LNG by sea. LNG can further be distributed via existing pipelines offering a possible diversification of supply routes which are currently tied to existing gas pipelines and suppliers. Diversifying supply routes can potentially offer leverage in negotiating more favourable gas supply contracts, as it can offer a potentially more affordable supply gas. Additionally, having an alternative supply route would prove beneficial to the country’s energy security.
Key project issues
There are two major obstacles in forming a successful project involving an LNG regasification terminal:
1) current market prices of gas (both pipeline and LNG) offer more difficulties then opportunities for LNG;
2) at present, despite what consumption figures might suggest, there is no viable market for LNG.
Project framework
If the project is to be feasible, there is not much room for manoeuvres when high-level project framework is concerned. The Adriatic LNG project would have to:
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Be constituted as a public-private partnership (PPP);
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Be able to provide a decent margin between the prices of pipeline gas and LNG;
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Be provided a suitable financing arrangement;
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Have a long-term supply of LNG:
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Have a secured market in the long-term.
In order to provide secure market for the LNG supply, the Adriatic LNG project should be combined with other technological solutions able to utilise either LNG or gas. Biogas plants for the production of electricity from organic sources throughout present Europe, reveal biomethane production as the new frontier for energy efficiency able to comply with the Carbon Free 2050 Strategic Guidelines.
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