Energy research specialist Rystad Energy (Rystad) has revealed that an escalation of military tensions between Russia and Ukraine could put up to 155bn cubic metres per year of natural gas imports to Europe at risk, equating to 30% of Western Europe’s annual gas demand.
The threat is compounded by current five-year lows of gas stocks and high volatility in international liquefied natural gas (LNG) prices.
Although unlikely, a complete shut-off of Russian exports would cause Europe to struggle to meet its gas needs, especially Eastern Europe, which is most reliant on Russian imports.
Less affected would be Western Europe, which has ‘nearly enough’ LNG import capacity to replace all Russian gas but would need support from nations such as the US and Japan to make up the difference – around 8 Bcm of domestic production.
As LNG needs to be converted back into gas before sent to pipelines ready for importing countries, regasification capacity needs to meet the demand. Rystad revealed that Western Europe’s regasification capacity was operating at 100% last month with just ‘minimal’ spare capacity to accommodate a future increase in import volumes.
Some European nations such as Poland and Lithuania have smaller amounts of additional LNG import terminal capacity, whereas Southern Europe has a higher amount of spare capacity but is considered less reliant on Russia.
Should a military event occur, the existing gas supply piped through Ukraine to Europe – 40 Bcm – would likely be disrupted.
Commenting on the research, Sindre Knutsson, Vice President for gas and LNG market analysis, Rystad Energy, said, “Despite Europe’s implicit policy to reduce its dependence on Russian gas – as demonstrated by the significant build-up in LNG import facilities on Western Europe’s coast in recent years – Russia plays a pivotal role in helping meet the region’s gas needs.”
“As a result, any military conflict could have serious ramifications for European gas supply.”
Yesterday (10th February), Japan’s Minister for Economy, Trade and Industry (METI) revealed that multiple gas shipments are already being diverted to Europe by Japanese firms and are scheduled to arrive later this month.
During a meeting with EU representatives, Hagiuda indicated that Japan will help provide ‘sufficient’ LNG supplies to Europe.
Despite being unlikely to significantly affect the UK – which sources less than 5% of its natural gas from Russia – European gas storage levels remain historically low at 45 Bcm, 30% lower than the five-year average.
LNG imports into Western Europe totalled 294 million cubic metres per day (MMcmd) in January 2022, a new all-time high utilising 100% of the region’s regasification capacity.
Providing European countries are willing to pay elevated prices, the Rystad research revealed that the bulk of the extra LNG supply could come from the US.