LNG import terminal efficiency in Europe

LNG demand is increasing in Europe and an import infrastructure is required to meet these demands. In developing this infrastructure the performance of LNG import terminals has to be maintained. Research on LNG terminal efficiency is limited, even though it can provide valuable information towards the further development of the LNG infrastructure. The following study has provided a way for terminals to benchmark terminal efficiency. In seeking explanation for the differences encountered, lessons are learnt about sources of inefficiency. The study has focussed on European LNG import terminals, but the methods used can be implemented in a wide variety of settings. The relative efficiencies of LNG import terminals in Europe have been measured by implementing a DEA, performed using the OSDEA software. The DEA variant chosen in this case was the output oriented variable (increasing) returns to scale model measuring technical efficiency by using unloading, regasification and storage capacity as inputs and surface area and capital costs as outputs. The outcome of the analysis has indicated that eight out of the 15 included terminals are deemed inefficient. Inefficiency scores vary from 1.055 to 1.443 indicating certain terminals should be able to increase their levels of output with up to 44.3 percent. Slacks have indicated that especially unloading capacity is falling behind. Findings have shown how terminals with high output levels and capital costs tend to score more efficiently. Due to high unloading, storage and regasification capacities terminals are capable of dealing with uncertainties and, therefore, manage to achieve higher levels of efficiency. The explanation for the high capital costs of efficient terminals is found in their equipment. In striving for efficiency these terminals invest in expensive equipment. This equipment composes a large part of the capital costs and, therefore, more advanced terminals require higher capital costs. The efficiency analysis, however, proved incapable of dealing with external factors like construction delays. Further research might incorporate means of coping with these factors. The future trends of the gas and LNG market have to be kept in mind, however.