The EU includes Austria, Belgium, Bulgaria, Croatia, Republic of Cyprus, Czech Republic, Denmark, Estonia, Finland, France, Germany, Greece, Hungary, Ireland, Italy, Latvia, Lithuania, Luxembourg, Malta, Netherlands, Poland, Portugal, Romania, Slovakia, Slovenia, Spain and Sweden.

The EU deal would exempt imports delivered by pipeline, to satisfy embargo objections by Hungary as well as by Slovakia, the Czech Republic and Bulgaria. Hungary receives 60% of its oil from Russia. 

Poland and Germany have already signaled they will not participate in the pipeline carveout, according to German media, which involves Russian shipments via the northern branch of the Druzhba pipeline system. In past years, the system shipped about 1 million bbl/d to central Europe, says S&P Global. But with transition to other sources, Germany has cut dependence on Russian crude oil to 12% of imports from 35% before the invasion of Ukraine, it adds.

US Export Growth Seen

Increased exports of U.S. Gulf Coast crude are expected into Europe in the coming months, as well as liquefied natural gas (LNG) promised by the Biden Administration. With the improved outlook and rising prices, developer Venture Global LNG announced on May 25 a final investment decision to build the proposed Plaquemines LNG export plant in Louisiana, saying it had closed on $13.2 billion in project financing for the initial phase already underway by engineer KBR and contractor Zachry Construction, as well as an associated pipeline.

The firm's Calcasieu Pass terminal, also in Louisiana, is expanding exports to Europe since its operation began on March 1.

But energy market observers note hurdles based on Europe's limited existing LNG import infrastructure—and similar US constraints on the export side—to accommodate rising demand.

Infrastructure Ramps Up

German media speculate whether the country can obtain gas from Israel, which is ramping up production from its recently completed Leviathan offshore natural gas field. Distribution and supply options are complicated, but one short term option would be via a chartered floating liquefied natural gas facility. Longer term, plans are now being dusted off for European pipelines—long shelved as being uneconomic or politically difficult—ncluding a potential subsea pipeline to be built from Turkey linking southern European states to Leviathan.

Also in the Mediterranean, Italian energy infrastructure developer Snam is working with Spanish gas grid operator Enagás on a feasibility study for a natural gas pipeline that would connect the two countries. Spain has the large regasification capacities to take in potential US imports, but the high Pyrenees Mountains block land routes for a pipeline. Snam is also acquiring floating regasification units, to supply the island of Sardinia and for deployment in a central or northern Italian port. Operation would start in early 2023, once the necessary infrastructure is built.

A large and as-yet untapped gas field in the shallow Wadden Sea off the Dutch, German and Danish coasts now has final permits in place from the Dutch Ministry of Economic Affairs and Climate, with German project approval soon.

Dutch engineer ONE-Dyas plans to deploy a floating gas platform about 12 miles offshore to be powered by the 113-MW Riffgat offshore wind farm, with a pipeline to transport gas to shore. Assuming the project goes ahead and is not derailed by threatened lawsuits, gas production would begin in 2024.
 
Meanwhile, in the eastern German region called Lausitz, a large open-cast brown coal mine that had been court ordered to halt operation on May 15 because of an environmental challenge to its water table management, will stay open for use at a nearby power plant following a higher court reversal.

Construction started earlier in May for Germany’s first floating LNG terminal in Wilhelmshaven. The country is leasing four floating units for the immediate future, to be operated by utilities RWE and Uniper, with the plan to receive LNG shipped in from the US, Norway and other sources, where it will be re-gasified at the port of entry and fed into existing pipelines.

That plan is already being challenged by environmental groups, but the German government is moving to enact new rules to speed permitting and construction.

Other EU member nations are looking to build up their gas and energy networks, such as interconnections between Poland and Denmark; and links between Romania, Serbia, Bulgaria and Greece.

The latter two on May 3 signed off to build a floating LNG terminal in the Aegean Sea off Alexandroupolis, a port in eastern Greece near Turkey and the Bulgarian border. The $382-million terminal is set to come on line at the end of next year, and be a gateway for LNG shipments through southeastern Europe.

Construction Impacts

Both industry and government are concerned about the energy fallout from the ongoing conflict: The German construction trade association is warning about price increases and supply-chain bottlenecks affecting the ability to complete jobs on time, and that the squeeze on refined petroleum products will have effects on construction material supplies.

Oficials cite potential effects on critical asphalt production. A refinery in Schwedt, eastern Germany, the main terminal for the Russian supply, also refines 400,000 metric tons per year of bitumen from the oil transports and is partly owned by Russia's giant Rosneft energy firm. The company has further ownership interest in plants around the country that together produce another 900,000 metric tons per year. The Schwedt facility also produces fuel for some regional power plants.

In an April 28 letter to German economics minister Robert Habeck and transport minister Volker Wissing, top officials of the country's construction and asphalt trade groups asked for priority to boost domestic asphalt production rather than find other sources for import. The groups want bitumen classified as a strategic resource for the country.

The Ukraine war fallout is creating material shortages, price increases, energy supply bottlenecks and the threat of construction project stoppages, they say. The construction officials contend that despite high pent-up demand for construction through the tail-off of the pandemic, industry may need to impose kurzarbeit — or rationed, part-time working hours.

The groups want the German government to ensure secure supplies of raw materials for maintenance and modernization of the country’s infrastructure to insure military mobility—and a raw materials strategy that meets the challenges resulting from the conflict.