In the face of rising LNG demand, how far will Europe go to replace Russia
In the face of rising LNG demand, how far will Europe go to replace Russia

In the face of rising LNG demand, how far will Europe go to replace Russia

  • 19-May-2022 6:10 PM
  • Journalist: Patricia Jose Perez

New Delhi, India: Europe has been importing historical volumes of Liquefied Natural Gas (LNG) but for over six months now, it is striving to replace Russian pipeline gas supply as much as possible. In contrast to previous years, Europe is currently the most attractive destination for global LNG flows, outcompeting Asia for spot supplies as prices and demand in Europe have skyrocketed following the EU's irreversible decision to end its reliance on Russia for gas consumption. Europe has supplanted Asia as the major driver of LNG demand since last autumn's energy crisis and it is no longer considered "the market of last resort" for LNG cargoes. The war between Russia and Ukraine has prompted Europe to begin reducing its massive reliance on Russian piped gas, without which the continent faces a major industrial slowdown and a scramble to secure warmth for the coming winter.

However, due to rising demand, Europe's LNG terminals are at peak, restricting the number of cargoes the continent can import until new import and regasification terminals are built and operational. To secure slots at terminals, producers are eager to expand their LNG exports to Europe and have offered cargoes at discounts of up to 20% off the pricing at the Dutch TTF hub, the European benchmark gas price. This offer comes as the EU looks to cut ties with Russia as soon as it can do so without triggering a recession.

With already low levels of gas in storage and rebounding industry demand post-COVID, Europe was pushed into an energy crisis in autumn 2021, even before Russia's invasion of Ukraine. The conflict in Ukraine has caused Europe to reconsider its energy strategy, and the European Union has now devised plans to reduce EU demand for Russian gas by two-thirds by the end of 2022 and totally by 2030, potentially by 2027.

While China deals with new COVID limits and lockdowns, Europe is projected to remain the preferred destination for spot LNG cargoes for the rest of this year and for the next year. Before next winter, the Europe will try to rebuild gas storage levels in order to be better prepared if Russia decides to halt gas deliveries to more Europe customers, as it has previously done with Poland and Bulgaria. After rejecting a Russian demand for a new payment system, Bulgaria and Poland have already been cut off from Russian supplies. Others, such as Germany, require Russian gas and are racing to replenish reduced supplies.


Although the global gas market was tight even before the Ukraine crisis, several nations have alternate supply possibilities, and Europe's gas network is integrated so supplies may be shared. Germany, Europe's largest user of Russian gas, which has suspended approval of Russia's new Nord Stream 2 gas pipeline due to the Ukraine conflict, might import gas via pipelines from the United Kingdom, Denmark, Norway, and the Netherlands.

Related News

U.S. LNG Exports Set to Surge, Eyes on China's Growing Demand for Cleaner Energy
  • 03-May-2024 12:50 PM
  • Journalist: Patrick Knight
Oman LNG Inks 10-Year Gas Supply Deal with Turkey’s Botas Petroleum
  • 22-Apr-2024 2:25 PM
  • Journalist: Harold Finch
U.S. LNG Projects on Radar for Aramco and ADNOC
  • 08-Mar-2024 3:57 PM
  • Journalist: Patrick Knight
Germany's Energy Landscape Shifts as LNG Import Terminal Construction Gains Traction
  • 03-Jan-2024 12:04 PM
  • Journalist: Patricia Jose Perez