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Tsvetana Paraskova

Tsvetana Paraskova

Tsvetana is a writer for Oilprice.com with over a decade of experience writing for news outlets such as iNVEZZ and SeeNews. 

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U.S. LNG Cannot Replace The Russian Natural Gas That Europe Has Lost

  • Europe has relied on U.S. LNG imports to offset the loss of Russian gas, with nearly 70% of U.S. LNG exports heading to Europe in September.
  • In the long term, Europe will have to find other sources of natural gas as its inventories are likely to drain over the upcoming winter.
  • Ultimately, Europe will have to reduce demand for natural gas going forward as there is very little available supply left.
LNG

Europe cannot rely solely on imports of U.S. LNG to offset the pipeline gas supply it will have lost from Russia when it starts rebuilding inventories after the end of this winter, according to BloombergNEF.

So far this year, American LNG has been crucial in meeting demand in Europe, which is scrambling for gas supply and willing to pay up for spot deliveries, outbidding most of Asia.

The United States is shipping record volumes of LNG to Europe to help EU allies and nearly 70% of all American LNG exports were headed to Europe in September, according to Refinitiv Eikon data cited by Reuters.  

However, the significant drop in Russian gas supply this year occurred only in June, meaning that Europe could still stock up on some Russian gas earlier this year.

Ahead of the 2023/2024 winter, however, the gap in gas supply in Europe will be much wider without Russian gas. Europe will not be importing much Russian gas—or none at all if Russia cuts off deliveries via the one link left operational via Ukraine and via TurkStream—compared to relatively stable imports from Russia in the first half of this year, before Moscow started gradually cutting volumes via Nord Stream in June until shutting down the pipeline in early September.

“The year-on-year increase is not sufficient to offset a total cut in Russian piped supply with under half of these volumes met by LNG increases,” BNEF analyst Arun Toora said.

“The good news is that Russia looks close to having played its last card in terms of gas leverage over Europe. However Europe’s challenges will not disappear with the daffodils next spring,” London-based consultancy Timera Energy said in a winter gas market outlook at the beginning of October.

Without most of the Russian gas supply, Europe will likely need to offset around 40 bcm of additional lost Russian flows next year. LNG alone cannot meet this volume, considering a lack of new global liquefaction capacity in the short-term, including in the U.S., limited further demand elasticity in Asia, and European regasification capacity constraints. Therefore, European demand will need to fall, Timera Energy said.

By Tsvetana Paraskova for Oilprice.com

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Leave a comment
  • Mamdouh Salameh on October 28 2022 said:
    Both Russian gas and oil supplies to the EU and also to the world are irreplaceable. Moreover, the combined United States’, Qatar’s, Algeria’s and Australia’s LNG exports can’t replace Russian piped gas supplies to Europe amounting under normal circumstance to 221 billion cubic metres (bcm) including 16 million tons of LNG (equivalent to 22 bcm of LNG). This is partly because most of these producers’ LNG is already contracted to customers in the Asia-Pacific region in long-term contracts.

    The United States can’t raise its LNG supplies to the EU further because of rising demand back at home. Moreover, there have been growing complaints among some EU members particularly Germany about the exorbitant prices the US is charging the EU for its LNG supplies. Even French President Emmanuel Macron was driven to accuse the US with double standards in its dealings with the EU leaving Europe paying higher prices for LNG while the US is enjoying low energy prices at home.

    Qatar, the world’s largest exporter of LNG made it clear that it will not divert any gas that is already under contract with Asian buyers to Europe this winter, regardless of any other considerations. Qatar said it is absolutely committed to the sanctity of contracts.

    Dr Mamdouh G Salameh
    International Oil Economist
    Global Energy Expert
  • Manuel LANZA on October 28 2022 said:
    Looks like oil/gas cap will not work and Brussels, among peers, will feel the forthcoming climate, let alone the impact on their GDP.

Leave a comment




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