The Role of LNG in the Energy Transition

This paper studies the developments in the worldwide trade of Liquefied Natural Gas (LNG) and the impact this development has on the logistics network in Europe. Data on the worldwide trade is retrieved from the databases of the International Energy Agency and a Fixed Effects model is used to measure the effect of population, GDP, prices for energy and government policy on the demand for LNG. In line with the expectations, the effects of population, GDP and price of substitutes were positive of nature, whereas prices for natural gas and LNG had a negative effect on the demand for LNG. Government policy represented by greenhouse gas emissions had mixed effects, which could only partially be explained. The observed increase of trade in LNG over the last decades has resulted in an increase in the LNG handling capacity in Europe. The number of receiving terminals in Europe has risen and will continue to rise over the next five years. The capacity of the LNG terminals is concentrated in the Mediterranean Sea area, which can be explained by (1) the closeness to the countries of origin and (2) the lack of an extensive pipeline network in Spain and Portugal. Ports that want to attract LNG terminals should therefore focus on the hinterland infrastructure (pipeline network) and the rising demand for LNG from the maritime and road transport sectors.