COMMUNICATION FROM THE COMMISSION TO THE EUROPEAN PARLIAMENT, THE COUNCIL, THE EUROPEAN ECONOMIC AND SOCIAL COMMITTEE AND THE COMMITTEE OF THE REGIONS on an EU strategy for liquefied natural gas and gas storage
Date: 2016-02-16
Institutions: Directorate-General for Energy, European Commission
Subjects: competitiveness, energy cooperation, energy diversification, energy efficiency, energy storage, energy supply, gas supply, natural gas, security of supply, storage

EN 

   EN 

   EUROPEAN COMMISSION  Brussels, 16.2.2016  COM(2016) 49 final   COMMUNICATION FROM THE COMMISSION TO THE EUROPEAN PARLIAMENT, THE COUNCIL, THE EUROPEAN ECONOMIC AND SOCIAL COMMITTEE AND THE COMMITTEE OF THE REGIONS on an EU strategy for liquefied natural gas and gas storage {SWD(2016) 23 final}  
 
 
INTRODUCTION:  EXPLOITING  THE  FULL  POTENTIAL  OF  LNG  AND 
STORAGE IN THE INTERNAL MARKET 

The  European  Commission's  "Framework  Strategy  for  a  Resilient  Energy  Union  with  a 
Forward-Looking Climate Change Policy"1 gives concrete expression to the EU's ambition to 
bring  about  a  transition  to  a  sustainable,  secure  and  competitive  energy  system.  Energy 
efficiency "as an energy source in its own right" and the development of low carbon sources 
such as renewables are paramount in this context.  

As stressed in the State of the Energy Union2, the geopolitical challenges linked to ensuring 
secure  and  resilient  supplies  of  fossil  fuels  also  remain  significant,  particularly  as  regards 
commodities  for  which  the  EU  is  highly  dependent  on  imports.  In  this  context  the  further 
diversification of the EU's natural gas supply remains a key objective, particularly as domestic 
production  in  the  EU  will  continue  to  decline  in  coming  decades.  Vulnerability  due  to 
increasing  import  dependency  can  also  be  mitigated  if  the  gas  system  remains  flexible  and 
able to respond to fluctuations in supply. The present strategy aims to exploit the potential of 
liquefied  natural  gas  (LNG)  and  gas  storage  to  make  the  EU  gas  system  more  diverse  and 
flexible,  thus  contributing  to  the  key  Energy  Union  objective  of  a  secure,  resilient  and 
competitive gas supply.  

As regards LNG, the prospect of a dramatic (50%) expansion in global supply over the next 
few  years  and  consequently  of  lower  prices  presents  a  major  opportunity  for  the  EU, 
particularly when it comes to gas  security and resilience. While many Member States enjoy 
mature  and  liquid  gas  markets,  as  the  2014  EU  Energy  Security  Strategy3  and  the 
Communication  on  the  short  term  resilience  of  the  European  gas  system4  make  clear,  four 
Member States in the Baltic, central-eastern and south-eastern European regions are heavily 
dependent on a single supplier, and hence vulnerable to supply interruptions.  

These Member States need rapidly to develop access to a diverse range of energy sources, and 
the  availability  of  LNG  could  make  a  major  contribution  in  this  regard,  alongside  existing 
pipeline  sources,  gas  storage,  the  development  of  both  the  Southern  Gas  Corridor  and  of 
liquid gas hubs in the Mediterranean. Energy efficiency measures and lower carbon sources 
such  as  renewables  are  also  crucial,  and  care  should  be  taken  with  regard  to  investment  in 
LNG or gas infrastructure to avoid the risk of technology lock-in or stranded assets in fossil 
fuel infrastructure.  

LNG  can  also  bring  benefits  in  terms  of  competitiveness,  as  markets  become  exposed  to 
greater competitive challenges from international suppliers. In some cases the impact of such 
changes can be significant, as in the case of Lithuania.  

To exploit the full potential of access to a growing international LNG market and to make the 
EU an attractive market for suppliers the EU needs to do three things: 

Firstly, it needs to ensure that the necessary infrastructure is in place to complete the internal 
market  and  allow  all  Member  States  to  benefit  from  access  to  international  LNG  markets, 

1 COM(2015)80. 
2 COM(2015)572. 
3 COM(2014)330 
4 COM(2014)654  

2 

 
 
 
 
 
 
 
 
 
                                                            
either directly or via other Member States. This is particularly urgent for Member States that 
are overly dependent on a single supplier.  

Secondly,  the  EU  needs  to  complete  the  internal  gas  market  so  that  it  sends  the  right  price 
signals – both to attract LNG to where it is needed and to allow the necessary investments in 
infrastructure to take place.  

Thirdly, the EU step up its efforts to cooperate closely with international partners to promote 
free,  liquid  and  transparent  global  LNG  markets.  This  means  intensifying  dialogues  with 
current  and  future  suppliers  and  other  major  LNG  consumers  to  remove  obstacles  to  the 
trading of LNG on global markets. 

In addition to improving security and competitiveness, LNG has the potential in some cases to 
reduce  environmental  impacts,  and  hence  support  the  EU's  sustainability  objective.  A  key 
sector  in  this  respect  is  transport,  where  LNG  will  increasingly  be  used  as  an  alternative  to 
marine fuels in shipping and to diesel in heavy duty vehicles such as lorries. Small scale LNG 
may also play a role in reducing environmental impacts in the supply of heat and power, for 
example to  industry or other  consumers in  remote and/or  off-grid areas currently dependent 
on more polluting fossil fuels. 

The  changing  situation  on  gas  markets  also  means  change  for  EU  gas  storage  facilities, 
which play a key role in optimising gas infrastructure use and balancing the system. Robust 
and  sufficient  gas  storage  facilities  are  crucial  to  energy  security  and  resilience  in  times  of 
major supply disruption.  

However, as with LNG, the full potential of storage to contribute to gas security and resilience 
is not currently being exploited. Investment in gas storage facilities is hampered by obstacles 
that  reduce  the  cross-border  availability  of  stored  gas  between  Member  States  and  by 
unfavourable market conditions. The profits of storage operations are under pressure and this 
may  jeopardise  not  only  future  planned  investments  but  also  existing  levels  of  storage 
capacity.  

This strategy, which fulfils a commitment in the Energy Union Framework Strategy and has 
been prepared in consultation with a wide range of stakeholders5, goes into the above issues in 
further detail and draws conclusions as to what specific measures may be necessary. 

5 As part of this the Commission conducted a three-month public consultation – the results of this are discussed further in the 
Commission staff working document accompanying this Communication. 

3 

 
 
 
 
 
 
 
 
 
                                                            
1. 

COMPLETING MISSING INFRASTRUCTURE 

LNG infrastructure 

Over a number of decades, the EU has built up a very extensive gas grid stretching across the 
continent. In addition to significant domestic production, it benefits from pipeline connections 
to some of the world's largest gas supply sources, including Russia, Norway and Algeria.  

The  EU's  current  LNG  terminals  provide  sufficient  overall  regasification  capacity,  with 
further additions planned6. However, they are not optimally distributed across the EU, which 
is  one  of  the  factors  contributing  to  the  supply  vulnerability  of  certain  Member  States  that 
have  little  or  no  choice  of  gas  supplier.  At  the  same  time,  existing  terminals  across  Europe 
have  in  recent  years  had  a  relatively  low  utilisation  rate7  due  to  higher  Asian  LNG  prices 
attracting cargos away from Europe and competition from pipeline gas. 

The challenge of non-optimal distribution of LNG terminals can be tackled either by building 
new  terminals  in  the  appropriate  locations  or  by  improving  access  to  existing  terminals. 
Increased  interconnection  to  liquid  hubs  where  gas  from  existing  LNG  terminals  or  from 
pipeline  sources  is  traded  would  improve  security  of  supply  for  those  Member  States  who 
currently  have  access  to  only  a  limited  number  of  supply  sources,  while  also  helping  to 
integrate markets across borders.  

With any new infrastructure, the key issue is commercial viability. For an LNG terminal, that 
may depend on it having access to more than just a national market8. Also, the emergence of 
floating storage and regasification units (FSRUs) as cost-effective solutions has also changed 
the dynamics of investment in  import capacity9. The example of the Klaipėda  FSRU shows 
that just the prospect of a new LNG source in the market can drive improvements in terms of 
gas security of supply and price competitiveness.10 

Even  with  a  sound  business  case,  the  financing  of  LNG  terminals  or  other  infrastructure 
investments may still face challenges. In principle, LNG terminals should be financed through 
tariffs but in some cases market participants bear the risk of the investment11. EU funds can 
help to make up for the weak commercial viability of terminals that are particularly important 
for security of supply. European Investment Bank loans, including under the European Fund 
for  Strategic  Investments  (EFSI),  may  be  another  source  of  long-term  financing  for  LNG 
infrastructure. However, it is still important that the full economic case for new terminals be 
considered and the most cost-effective solutions be adopted.12 

Storage infrastructure 

6 A table showing the import capacity of existing and planned LNG terminals is included in section 4 of the staff working 
document (SWD(2016)23). 
7 20% compared to the global average of 33%. See also staff working document. 
8 The project at Krk (Croatia) is a clear example of this. 
9 Due to lower investment costs and shorter lead times. The last six LNG terminals established have all been FSRUs. 
10 See section 4 of staff working document 
11 Exempted terminals; see also sections 3 and 4 of staff working document  
12 No State aid would in principle be allowed if the under-utilisation of existing relevant infrastructures indicates that no new 
infrastructure is needed. 

4 

 
 
 
 
 
 
 
 
 
 
                                                            
Total gas storage capacities in the EU have been growing strongly over the last 10 years and, 
combined  with  alternative  flexibility  mechanisms  such  as  more  fluid  cross-border  trade, 
pipeline swing and the increasing availability of LNG, this has led to some excess capacity in 
some  areas and  smaller differences between  summer  and winter  gas  prices.  The  availability 
and type of storage infrastructure differ significantly across the EU depending on energy mix, 
supply portfolio and geological situation.13 

In general, greater interconnectivity and regional cooperation could result in a better and more 
efficient  use  of  storage.  Also,  some  countries  in  the  EU’s  neighbourhood,  such  as  Ukraine, 
have substantial storage capacity that could in principle be developed further and connected to 
the  EU  gas  grid.14  If  that  capacity  were  available  for  supplies  to  the  EU,  the  EU  could 
optimise its own volumes of stored gas. 

Although current storage capacity appears sufficient, interconnection and regulation still need 
to be adjusted to improve its cross-border and wider regional availability. 

Connecting LNG and storage to markets 

The TEN-E Regulation15, adopted in 2013 together with the Connecting Europe Facility, has 
established  a  stable  European  policy  framework  for  supporting  also  the  EU's  gas 
infrastructure  (including  transmission,  LNG  terminals  and  storage),  identifying  the  projects 
Europe needs and ensuring their timely implementation.16  

Delivery of the TEN-E policy has been further reinforced through regional high-level groups 
focusing  on  the  regions  identified  as  vulnerable  in  the  EU  gas  stress  tests  of  2014  and  on 
ending the situation of the Iberian Peninsula as an 'energy island'.17 These groups have agreed 
on a limited number of key projects of common interest (PCIs) that should be implemented as 
a matter of priority and urgency.  

13   See section 5 of staff working document. 
14   See also section 5 of staff working document. 
15 Regulation (EU) No 347/2013 on guidelines for trans-European energy infrastructure; OJ L 115, 25.4.2013, p. 
39-75. 
16 The second Union list of projects of common interest (PCIs) was adopted on 18 November 2015. C(2015) 8052 final 
17 The Ten Year Network Development Plan 2015 identified the Iberian Peninsula as an area lacking integration with the rest 
of the EU and therefore exposed to price volatility on the global LNG market. 

5 

 
 
 
 
 
 
 
                                                            
EU infrastructure relevant for the LNG and storage strategy. Missing links: Infrastructure to be built/reinforced 
to improve connections of LNG terminals to the internal market. The blue dots indicate existing LNG terminals. 

The LNG and storage strategy identified a subset of these projects specifically contributing to 
its  objectives  (see  map).18  Modelling19  shows  that  implementation  of  these  key  PCIs  would 
end single-source dependency and give all Member States access to LNG, either via terminals 
or  indirectly20  via  interconnectors  and/or  access  to  liquid  hubs.  These  projects  would  bring 
real gas security and price competition to EU markets. More specifically:  

 

 

 

the Central East South Europe Gas Connectivity group (CESEC) group identified six 
key priority projects that contribute to LNG access for all countries in the region along 
two  main  corridors  from  the  Krk  terminal  towards  the  east  and  from  Greece  to  the 
north;  

the  Baltic  Energy  Market  Interconnection  Plan  (BEMIP)  group  identified  six  key 
priority projects that contribute to LNG and storage access in the region by connecting 
the three Baltic states and Finland to the European network; and 

the  South-West  Europe  high  level  group  identified  two  projects  that  would  serve  to 
eliminate bottlenecks and connect regional markets. 

18 A detailed list and project descriptions can be found in section 7 of the staff working document 
19 The results of the modelling both for LNG and storage and further background can be found in section 8 of the staff 
working document. 
20 Modelling also shows the need to complete the North-South corridor in central Europe to allow gas to move freely in all 
directions. 

6 

 
 
 
 
 
 
 
 
                                                            
Moreover,  analysis  has  consistently  highlighted  Ireland  as  lacking  diversity  of  supply  and 
Cyprus and Malta as being energy islands.  

The  EU  and  Member  States  should  commit  themselves  to  moving  towards  rapid  final 
investment decisions on these priority projects, the completion of which will ensure that the 
entire EU has access to multiple sources of gas. In doing so, they will go a long way towards 
providing  all  EU  citizens  with  affordable  and  secure  gas  supply.  The  Commission  will 
highlight  progress  and  additional  action  needed  on  a  project-by-project  basis  in  its  annual 
State of the Energy Union Report.  

Action points: 

  The Commission supports the work being carried out in the high-level groups mentioned 
above and encourages Member States and project promoters to accelerate final decisions 
on these key projects as a priority. It calls on Member States and the regional groups to 
make  rapid  progress  in  this  respect  and  in  reaching  swift  conclusions  on  the  future 
viability of LNG terminals. Progress should be discussed in the recently launched Energy 
Infrastructure Forum;  

  Work  should  be  stepped  up  to  complete  the  cost  benefit  analyses  to  determine  which  
LNG terminals and/or further interconnections to link them to markets are most optimal; 
and 

 

In  cooperation  with  the  regional  groups,  the  Commission  should  ensure  that  project 
promoters are aware of available project financing options (i.e. under the European Fund 
for Strategic Investments, the Connecting Europe facility, and, where relevant, European 
Regional  Development  Fund)  and  that  technical  solutions  (such  as  FSRUs)  are 
considered, paying particular attention to projects affected by barriers or delays. 

2. 

COMPLETING  THE  INTERNAL  GAS  MARKET:  COMMERCIAL,  LEGAL 
AND REGULATORY ASPECTS 

Making the EU an attractive market for LNG 

In  addition  to  sufficient  infrastructure,  properly  functioning  and  liquid  gas  markets  are  also 
required if EU consumers are to benefit from LNG's potential in terms of diversification and, 
at least in the short- to medium-term, as a highly competitive alternative to pipeline gas.  

Substantial  progress  has  been  made  in  implementing  existing  EU  energy  legislation,  in 
particular  the  Third  Energy  Package  and  the network  codes.21  Continued implementation  of 
all the provisions should ensure the emergence of a fully functioning internal gas market.  

Like  existing  pipelines,  existing  LNG  terminals,  are  subject  to  the  Third  Energy  Package. 
While  this  aims  to  make  the  external  entry  points  to  the  internal  market  more  flexible  and 
regards third-party access as the regulatory norm, a significant number of the LNG terminals 

21 Competition rules are also being strictly enforced, thereby preventing distortions of the internal gas market and enhancing 
security of supply 

7 

 
 
 
 
 
 
 
 
 
 
 
 
 
 
                                                            
are  currently  exempted  from  third-party  access22.  In  this  regard,  National  Regulatory 
Authorities should: 

  continue to ensure a level playing field for existing terminals; 
  enable  the  introduction  of  new  services,  including  those  in  relation  to  new 

technologies at LNG terminals; and 

  continue  to  enforce  transparent  and  effective  market-based  capacity  allocation 
mechanisms at exempted LNG terminals, so as to attract new entrants to reach EU gas 
markets. 

The easiest way for LNG supplies to change hands in European markets is through liquid gas 
hubs,  where  there  are  a  high  number  of  sellers  and  buyers  and  gas  comes  from  several 
sources.  Currently  only  a  limited  number  of  EU  Member  States  have  sufficiently  liquid 
markets23. In other parts of Europe, gas markets are far less developed: the central-, south-east 
and south-west regions do not have sufficiently liquid markets of their own and cannot access 
those in the north-west. There is a risk of countries in central- and southeast regions missing 
out on the benefits that access to international LNG markets – and gas market competition in 
general – can offer.  

It is therefore crucial that Member States, in cooperation with national regulatory authorities 
(NRAs), take all necessary action to complete the internal gas market, eliminate the remaining 
regulatory,  commercial  and  legal  barriers  and  provide  access  for  these  markets  to  effective 
regional  gas  hubs.  In  several  instances24  the  regional  approach  has  proven  effective  in 
launching  countries  on  the  right  path  to  improving  market  functioning;  these  regional 
initiatives should also take on board the priorities of this strategy in order to make the EU an 
attractive market place for LNG. 

Action points: 

  In the context of BEMIP, the Commission invites NRAs to draw up an action plan, 
by mid-2016, identifying measures (i) to manage the end of the derogation under the 
Third Package, so as to open the Baltic gas market fully as soon as possible and  (ii) to 
identify the necessary steps to creating a single market zone; 

  In the context of CESEC, the Commission invites the NRAs to propose an ambitious 
roadmap of regulatory solutions by mid-2016 which will support the CESEC process, 
and to report regularly to the High Level Group and ministers on progress achieved in 
this regard; and  

  In the context of the South-West Europe High Level Group, the Commission aims 
to  work  closely  as  a  priority  on  both  technical  and  political  levels  to  support 
completion of the Eastern Gas Axis, which is needed to connect the Iberian Peninsula 
better  to  the  internal  gas  market  and  allow  access  to  liquid  gas  hubs,  thereby 
contributing to the further diversification of the EU's gas portfolio. 

Gas storage in the internal market  

22 See section 4 of staff working document 
23 These markets cover some 75% of total EU gas demand (source: ACER based on Gas Target Model) 
24 Notably BEMIP, CESEC, and South-West Europe 

8 

 
 
 
  
 
 
 
                                                            
The regional context largely determines the need for and availability of storage capacity and 
the  role  that  storage  plays  in  gas  supply  and  energy  security.  Accordingly,  approaches  to 
regulating storage vary widely between countries and regions. 

Similarly,  tariffs  on  transmission  to  and  from  storage  vary  considerably  across  the  EU;  in 
some  cases  suppliers  have  to  pay  twice,  when  injecting  and  when  withdrawing  gas.  Such 
tariff structures may make storing gas less attractive and even, where tariffs are unduly high, 
uncompetitive. Therefore, the question of transmission tariffs  to and from storage should be 
addressed  in  work  to  develop  EU-wide  network  codes  so  as  to  ensure  a  level  playing-field 
between competing flexibility instruments, and tariff structures should reflect costs. 

Technological  aspects  of  storage  also  need  to  be  addressed  to  ensure  that  new  storage 
facilities  and  gas  infrastructure  can  in  future  accommodate  different  types  of  gas,  including 
bio-methane and other renewable gases. This should in turn facilitate increased use of storage 
capacity  for  biogas  and  hence  the  transition  to  a  low-carbon  economy.  However,  storage 
operators  face  a  declining  spread  between  the  gas  price  in  summer  and  winter,  resulting  in 
lower profitability of gas storage, which makes storage sensitive to any cost increases. 

To allow storage to reach its full potential as a flexible instrument and to ensure efficient use 
of  infrastructure,  regulators  should  allow  and  encourage  storage  operators  to  develop  and 
provide new services that are freely tradable on secondary markets and across borders. Such 
developments and arrangements should not discriminate between storage users. Competition 
between  operators  will  ensure  that  storage  providers  and  their  customers  can  negotiate 
contractual  terms  reflecting  their  needs  in  the  most  cost-efficient  manner.  A  strict 
enforcement of competition rules will ensure that this in indeed the case. 

The EU’s strategy on storage should also involve better-connected regional markets, as there 
is  still  potential  for  storage  to  benefit  from  synergies  in  the  internal  energy  market.  The 
effective  use  of  storage  sites  will  require  Member  States  to  cooperate  closely  on  a  regional 
basis  and  consult  with  neighbouring  countries.  Increased  regional  cooperation  will  improve 
trust as regards the availability and accessibility of storage facilities outside the territory of a 
given Member State. 

In  this  context,  and  with  regard  to  cooperation  between  Member  States  and  regions,  the 
allocation  of  storage  and  transmission  capacity  at  interconnection  points  does  not  always 
appear to be satisfactorily harmonised and this may create congestion problems. With regard 
to  storage  and  transmission  capacity  at  interconnection  points  attribution  processes  should 
allow operators to book them simultaneously and an adequate time in advance of their needs; 
this could contribute for optimising the regional use of storage. The Commission encourages 
Member States to work and consult more closely with neighbouring countries on this issue. 

Action points: 

  The  Commission  calls  on  Member  States  to  ensure  adequate  physical  access  to 

storage, including in terms of capacity in the transmission network 

  The  Commission  encourages  Member  States  to  work  closely  with  neighbouring 

countries to optimise the regional use of storage; and 

9 

 
 
 
 
 
 
 
 
 
 
 
  The  Commission  aims  to  optimise  the  use  of  storage  through  the  completion  and 

adjustment of network codes, where necessary. 

Optimising the role of storage for security of gas supply 

While  available  storage  capacity  in  the  EU  appears  adequate,  there  may  be  a  risk  of  sites 
having  to  close  if  the  volume  of  gas  stored  continues  to  fall.  In  most  cases,  it  would  be 
technically impossible to re-open storage capacity and any such closure would be permanent. 
This  risk  may  arise  as  a  result  of  the  fact  that  the  market  does  not  fully  reward  the 
security-of-supply benefits of gas stored for crisis situations.25 Some Member States address 
this  by  using  strategic  reserves  and  storage  obligations.  Whereas  volumes  earmarked  as 
strategic reserves  are permanently  withdrawn from the  market, a storage obligation requires 
market  participants  to  place  and  hold  a  certain  minimum  level  of  gas  in  storage  at  specific 
points in time, in particular during the winter.26  

However,  to  avoid  unnecessary  costs  to  the  gas  system  that  would  reduce  the  overall 
competitiveness of gas vis-à-vis other fuels, these should be subject to strict conditions set out 
in  detail  in  regional  risk  assessments,  preventive  action  plans  and  emergency  plans,  as 
proposed  under  the  revised  Security  of  Supply  (SoS)  Regulation.27  In  particular,  Member 
States  should  ensure  that  such  measures  do  not  impact  negatively  on  other  Member  States’ 
ability to ensure gas supply to their consumers or on the development of national gas markets. 

To ensure that all market participants in Member States have access to sufficient storage on a 
regional  basis,  the  Commission  will  work  to  remove  existing  barriers,  including  regulatory 
ones, preventing storage from competing as an instrument of supply flexibility and ensure, in 
the context of the regional preventive action and emergency plans, that it can achieve its full 
potential. 

Action points: 

  Building  on  the  proposed  revision  of  the  Gas  Security  of  Supply  Regulation,  the 
Commission  calls  on  Member  States  to  optimise  the  effectiveness  and  efficiency  of 
the  use  of  storage  across  borders  through  regional  preventive  action  and  emergency 
plans; and 

  The Commission invites Member States to take action in the context of these plans to 

facilitate the availability of and access to storage on a wider regional level.  

25 See section 5 of staff working document. 
26 See section 6 of staff working document for more details. 
27 Proposal for a Regulation of the European Parliament and of the Council concerning measures to safeguard 
security of gas supply and repealing Council Regulation 994/210. 

10 

 
 
 
 
 
 
 
 
 
 
 
                                                            
 
 
 
 
 
3. 

THE EU AS A PLAYER ON INTERNATIONAL LNG MARKETS  

International  LNG  markets  are  set  for  major  change,  with  substantial  liquefaction  capacity 
coming on stream in Australia and the United States in the period to 2020 and potential for 
significant future supply from elsewhere, including the Mediterranean28. LNG prices over the 
next few years are expected to be lower than in the recent past, and EU imports are therefore 
likely to increase.  

A larger and more liquid global LNG market presents an opportunity for the EU. However the 
globalisation of the LNG market also has an important foreign policy dimension: as a major 
importer  of  LNG  (the  second  largest  after  Japan),  the  EU  has  a  keen  interest  in  promoting 
free, liquid and transparent LNG markets around the world. To this end, the EU needs to work 
closely with international partners and in international fora to ensure that market participants 
are  not  prevented  from  establishing  commercial  relationships  (for  example  by  territorial 
restrictions)  and  that  there  are  no  limitations  on  free  trade  –  either  under  normal  market 
conditions or in the event of external shocks. EU energy diplomacy instruments, as described 
in the Energy Diplomacy Action Plan, should actively be deployed in pursuit of this aim in 
bilateral and multilateral contexts, as set out in the action points below. 

Action points: 

  The  Commission,  together  with  the  High  Representative  and  Vice-President,  should 
pursue regular discussions on LNG with Australia and continue to work closely with 
other  current  and  potential  suppliers  such  as  Qatar,  Nigeria,  Egypt,  Angola, 
Mozambique,  Tanzania,  Israel,  Lebanon,  Iran,  Iraq  and  Libya.  Priority  should  also 
continue to be given to high level energy dialogues with Algeria, the US and Canada.  

  The EU should work closely with other major LNG importers such as Japan, notably 
in  the  context  of its  G7 Presidency in  2016, South  Korea,  China and  India,  with  the 
International  Energy  Agency,  and  in  multilateral  fora  to  pursue  common  interests  in 
promoting transparent and liquid LNG markets resilient to external shocks.  

 

In  line  with  the  revision  of  the  Inter-Governmental  Agreements  (IGA)  Decision 
published alongside this Communication, the Commission should check that relevant 
IGAs, including those between Member States and non-EU countries on LNG, are in 
compliance with EU law. 

4. 

SUSTAINABILITY AND THE USE OF LNG AS AN ALTERNATIVE FUEL IN 
TRANSPORT, HEAT AND POWER 

As  noted  in  the  introduction,  LNG  has  the  potential  in  some  cases  to  reduce  current 
environmental  impacts,  for  example  in  the  transport  sector  when  it  replaces  fuels  such  as 
diesel  or  heavy  fuel  oil.  The  use  of  LNG  in  lorries  and  shipping  can  reduce  emissions  of 
various pollutants and in the case of shipping, can allow the sector to meet the requirements 
for decreasing the sulphur and nitrogen content in marine fuels used in the Emission Control 
Areas. In both cases the use of LNG can reduce greenhouse gas emissions, in particular when 
blended  with  liquid  biomethane,  provided  methane  emissions  are  minimised  (see  below). 
Similar  considerations  can  apply  to  small  scale  LNG  use  for  heat  and  power,  and  the  EU 
should continue to support the growth of LNG as an alternative fuel where it replaces more 

28 See section 2 of the staff working document 

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polluting  conventional  fuels  and  does  not  take  the  place  of  renewable  energy  sources, 
consistent with sustainability goals.  

The precise environmental impacts will depend on a range of factors at different points in the 
LNG supply chain, and should be assessed case by case. A key factor in this regard (as for 
pipelines  and  for  natural  gas  use  in  general),  is  the  extent  of  any  methane  emissions,  and 
manufacturers  and  operators  of  all  LNG  supply  facilities  or  technologies  should  aim  to 
minimise such emissions and hence the overall greenhouse gas impact of LNG use.  

Another  key  factor  is  the  long  term  availability  of  lower  carbon  alternatives.  Renewable 
energy sources and/or energy efficiency can be highly cost-effective solutions in many cases 
and  such  options  should  be  considered  carefully  alongside  any  decisions  on  LNG 
infrastructure – particularly in the interests of avoiding technology lock-in or stranded assets. 
Further detail on the above issues can be found in the staff working document accompanying 
this Communication. 

Action points: 

  The  Commission  calls  on  Member  States  ensure  full  implementation  of  Directive 
2014/94/EU on alternative fuels, including the establishment of LNG refuelling points 
across the TEN-T corridors and at maritime and inland ports. 

  The  Commission  continues  to  pursue  its  works  to  establish  a  harmonised  regulatory 
and standardisation framework that encourages the development of LNG in shipping, 
in cooperation with stakeholders inter alia through the European Sustainable Shipping 
Forum. 

CONCLUSIONS 

The creation of liquid and competitive markets so that LNG and other new gas supplies can 
reach and compete in previously isolated markets is of fundamental importance to achieving 
the  objectives  of  the  Energy  Union.  The  Commission's  analysis  indicates  that  full 
implementation of the key PCIs highlighted by the high level groups will remove, or at least 
mitigate, the main vulnerabilities identified by the gas stress tests. It is therefore vital that the 
missing  infrastructure  links  rapidly  be  constructed,  and  the  requisite  measures  taken  to 
promote  liquid  and  competitive  markets,  including  those  to  enable  access  to  LNG  and  to 
promote  new  liquid  hubs  in  the  central  and  south  eastern,  Baltic  and  south  western  regions 
and the Mediterranean.  

Where the geological conditions allow for it, storage plays a major role in balancing the usual 
daily  and  seasonal  fluctuation  of  supply  and  demand.  However,  the  effectiveness  and 
efficiency  of  the  use  of  storage  across  Member  States'  borders  and  at  regional  level,  both 
under  normal  market  conditions  and  in  crisis  situations,  could  be  improved.  This  should  be 
addressed  in  the  future  regional  preventive  action  and  emergency  plans  under  the  proposed 
revision of the gas SoS Regulation.  

The measures identified in this Communication go to the heart of the Energy Union and have 
the potential to achieve the aim of a secure and competitive gas market across the EU, but will 
require resolute action, particularly at Member State and regional level. The Commission will 
report on progress  as  regards  the strategic LNG and storage objectives presented here in  its 
annual State of the Energy Union, identifying, any additional measures required. 

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