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LNG, a pillar of EU gas supply diversification

Given the geopolitical context, the EU has presented a plan to phase out its dependence on fossil fuels from Russia well before 2030 and, in particular, to reduce its imports of Russian gas by two thirds by the end of the year, relying mainly on LNG.

As the International Energy Agency points out (1), Europe’s reliance on imported natural gas from Russia has again been thrown into sharp relief by the political context of recent weeks. 
 

In this context, the European Union proposed on March 8 REPowerEU, a plan to make Europe independent from Russian fossil fuels, starting with gas, well before 2030. (2) 

REPowerEU aims to increase the resilience of EU energy system and, firstly, to diversify its natural gas supply sources by increasing LNG imports and gas imports by pipeline from non-Russian suppliers, and by boosting the use of biomethane and renewable hydrogen. (3) 

The EU imports 90% of its gas consumption (3). (IEA) In 2021, the European Union imported 155 billion cubic meters (bcm) of natural gas from Russia, of which approximately 15 bcm were delivered in the form of liquefied natural gas (LNG). (1) 

Gas from Russia accounts for around 45% of the EU’s gas imports. Over the past years, this number has been on average around 40%. The other main gas suppliers to the EU were Norway (23%), Algeria (12%), the United States (6%) and Qatar (5%). (3) 

Thanks to the increased gas interconnection capacity, in recent months, the Commission has been able engage with a range of partners around the world to diversify supplies of gas through pipelines or through LNG. The US, Norway, Qatar, Azerbaijan, Algeria, Egypt, Korea, Japan, Nigeria, Turkey, Israel are among these countries. This resulted in record volumes of LNG imports in January and February. The EU has the potential to import a further 50 bcm of LNG on a yearly basis. The European Commission underlines the importance of further diversifying our suppliers and infrastructure, accelerating projects already plannedand analysing other necessary new infrastructure with a strong cross border dimension and hydrogen compatibility. (3) 

The European Commission estimates that already before the end of the year, RePowerEU could result in the EU's gas demand going down by volumes equivalent to two thirds of Russian gas imports from last year. (3) 

The Commission also encourages an accelerated roll-out of solar, wind and heat pumps. Thus, it also proposes to roll out 10 million heat pumps in the next five years to help European families reduce their dependency on gas and cut their energy bills. (3) 

 

For its part, the IEA released on March 3 the “10-Point Plan to Reduce the European Union’s Reliance on Russian Natural Gas” (4) 

According to the IEA, taken together, these steps could reduce, within a year, the European Union’s imports of Russian gas by more than 50 bcm, or over one-third, with additional temporary options to deepen these cuts to well over half. This takes into account the need for additional refilling of European gas storage facilities in 2022. (4) 

The key actions recommended in the IEA’s 10-Point Plan include not to sign any new gas contracts with Russia; to maximise gas supplies from other sources; to accelerate the deployment of solar and wind; to make the most of existing low emission energy sources, such as nuclear and renewables; to speed up the replacement of gas boilers with heat pumps and to ramp up energy efficiency measures in homes and industry. (4) 

Increasing LNG imports is also for the IEA the most effective option, since the EU could theoretically increase near-term LNG inflows by some 60 bcm, compared with the average levels in 2021. However, considering current forward prices and the LNG supply-demand balance, the IEA has factored into its plan a 20 bcm increase in the EU’s LNG imports over the next year. (4) 

The 10-Point Plan is consistent with the EU’s climate ambitions and the European Green Deal, and many of the actions recommended in the plan are key elements of the IEA’s Net Zero Emissions by 2050 Roadmap, in which the EU totally eliminates the need for Russian gas imports by 2030. (4) 

 

Sources:

[1] https://ec.europa.eu/commission/presscorner/detail/en/ip_22_1511  

[2] https://www.iea.org/news/how-europe-can-cut-natural-gas-imports-from-russia-significantly-within-a-year  

[3] https://ec.europa.eu/commission/presscorner/detail/en/QANDA_22_1512   

[4] https://www.iea.org/reports/a-10-point-plan-to-reduce-the-european-unions-reliance-on-russian-natural-gas  

 

Other source:

https://www.nytimes.com/2022/03/25/business/energy-environment/biden-europe-lng-natural-gas.html