LNG Exports to Europe: What Are Floating Storage Regasification Units (FSRUs)?

LNG Exports to Europe: What Are Floating Storage Regasification Units (FSRUs)?

INSIGHTi

LNG Exports to Europe: What Are Floating
Storage Regasification Units (FSRUs)?
June 22, 2022
U.S. to Europe LNG Capacity
On March 25, 2022, as part of the U.S. response to the Russian invasion of Ukraine, President Biden
announced an initiative to help Europe reduce dependence on Russian natural gas supplies by increasing
U.S. exports of liquefied natural gas (LNG) to the European Union. U.S. gas exporters already were
moving in this direction, as exports to Europe accounted for 74% of total U.S. LNG exports in the first
quarter of 2022, compared to 34% in the first quarter of 2021. However, Europe’s total LNG imports
would need to increase substantially beyond current levels to replace all Russian natural gas imported to
the EU by pipeline. Europe’s ability to import more LNG, and the United States’ ability to supply it, are
physically constrained. The existing LNG terminals and associated infrastructure on both sides of the
Atlantic already are operating at full capacity, and one U.S. LNG terminal has been temporarily shut
down due to an accident.
To increase trans-Atlantic LNG supplies, developers in the United States have begun constructing new
onshore export terminals and expanding existing terminals, while plans for at least one onshore import
terminal have been announced in Europe. Onshore LNG terminals can take several years to design and
construct, so European companies are turning toward floating storage regasification units (FSRUs) as a
means of increasing imports more quickly. In recent testimony before Congress, a U.S. Department of
State official highlighted the importance of FSRUs to expanding bilateral energy trade. However,
although FSRUs are an established technology, their availability may largely determine how much more
LNG Europe can ultimately import from the United States.
FSRU Capabilities and Global Fleet
FSRUs are specialized marine vessels that can store, transport, and regasify LNG for direct injection into
natural gas pipelines. They require some onshore and port infrastructure, but not the extensive berthing,
piping, storage tanks, and associated infrastructure required for conventional LNG import terminals.
FSRUs are seagoing vessels that can be readily relocated. Thus, they may be used simply as LNG tankers,
but in regasification service they remain moored at an unloading facility which connects them to an
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onshore natural gas pipeline system. Stationary FSRUs receive LNG cargoes from conventional LNG
tankers via ship-to-ship transfer and can store the LNG onboard prior to regasifying it and offloading it to
a pipeline. The typical newly-built FSRU has a capacity of around 170,000 cubic meters of LNG, which
is also the typical size of an LNG tanker. In some cases, LNG tankers have been converted into FSRUs.
At the end of 2021, the world fleet of FSRUs consisted of 48 vessels. (By comparison, there were 588
conventional LNG tankers in the world fleet.) Three new FSRUs started commercial operations in 2021,
while 19 were reportedly under construction. South Korean shipyards have built much of the existing
FSRU fleet. Shipbuilders in Singapore and China also have built several vessels. The United States has
never built an FSRU, although it did build LNG tankers in the late 1970s. One U.S. company, Excelerate
Energy, owns 10 FSRUs deployed around the world and also provides the onshore infrastructure and
services required for natural gas delivery from FSRUs.
Building an FSRU can take up to three years and cost $300 million, whereas converting an existing LNG
tanker into an FSRU can take 18 to 24 months and cost $100-$150 million. Of the 48 FSRUs in the global
fleet as of 2021, 10 were conversions. The cost and construction time for the berthing and onshore
facilities required to offload the natural gas are highly site specific, depending upon permitting
requirements and existing port infrastructure. But FSRU onshore facilities require less capital than
conventional LNG terminals and have been put into service in under six months. FSRUs generally are
owned by companies that also own tankers, and LNG importers typically charter them for specified
periods. If an existing FSRU is available in the vessel charter market, a new LNG import location can be
operational in less than a year. By comparison, developing a conventional onshore LNG terminal can take
four years or longer.
FSRU Demand in Europe
There were four active FSRUs located in Europe at the end of 2021 in Italy, Croatia, Lithuania, and
Kaliningrad (Russia). Since then, several European countries have sought to contract for additional
FSRUs to establish greater LNG import capacity. These efforts have accelerated as Russia has cut off
natural gas exports to Poland, Finland, Bulgaria, the Netherlands, and Denmark. For example, Germany is
seeking to secure four FSRUs, Poland is developing one FSRU project and is exploring a second one to
serve Czech and Slovak demand, and Finland and Estonia jointly have chartered an FSRU. Long-term
LNG purchase agreements to supply some of these FSRU projects, such as Poland’s agreement with U.S.-
based Sempra, are providing the principal financial backing for U.S. LNG infrastructure expansion.
Europe’s ability to increase LNG import capacity quickly is limited by the availability of existing FSRUs
for charter. In the current market few if any FSRUs remain uncommitted, so LNG import expansion over
the next several years may depend to a significant extent on constructing new FSRU vessels. But demand
is also strong for conventional LNG tankers and containerships, which are built by the same shipyards
that build FSRUs. Many shipyards that might otherwise build FSRUs are booked. Conversion of older
LNG tankers into FSRUs at other shipyards provides an alternative, but the availability of shipyards with
such conversion capabilities also may be constrained. Chartering existing FSRUs deployed outside of
Europe as their current contracts expire is an option, but current users likely will seek to keep them where
they are. These potential impediments to further European FSRU deployment could inhibit the growth of
demand for U.S. LNG exports. They also may factor into decisionmaking of European buyers on whether
to pursue other alternatives, such as building pipelines to source more natural gas from Africa and Asia,
and accelerating investment in renewable energy and conservation.

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Author Information

Paul W. Parfomak
John Frittelli
Specialist in Energy Policy
Specialist in Transportation Policy

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