Germany and some other EU countries are hastily setting up new floating gas terminals at their ports to help cope with the severe reduction in natural gas exports from Russian pipelines since the Ukraine war started nearly two years ago. To make up the shortfall, they have been buying more liquefied natural gas (LNG) from other countries, including the US and Qatar.

Adding extra floating terminals is the fastest way to increase capacity. They are required to convert the liquid gas into gaseous form so that it can be transmitted through the pipeline network to wherever it’s required. The EU’s import capacity for LNG has already been increased by nearly a quarter to just over 200 billion cubic metres per annum (bcma) since the start of 2022, and is due to go up by about another 20bcma over the winter, most of it added in Germany.

The aim is to avoid a repeat of last winter, when a 60% surge in EU demand for LNG led to a spike in energy prices that peaked at over ten times their usual levels. This was accompanied by port congestion problems from the increased number of LNG carriers, some of which were delayed in unloading as a result.

Quantifying the cost

In our recent research, we’ve been looking at how much these congestion problems affected energy prices. It’s well known that port delays of any kind are expensive: between May and November 2021 in the US alone, a combination of port congestion and a shortage of shipping containers reduced exports to the tune of US$15.7 billion (£13 billion) (it’s not known how much was caused by one or the other). When this happens, it forces companies to charge more on their products to protect their earnings, meaning prices go up.