PUBLISHER: GlobalData | PRODUCT CODE: 1279519
PUBLISHER: GlobalData | PRODUCT CODE: 1279519
The Russia-Ukraine conflict brought Europe's reliance on Russian natural gas imports to the fore. The bloc has since tried to decrease its dependance and in February 2022 committed to cutting two third of Russian natural gas imports by the end of the year. However, with a limited ability to meets its energy needs through domestic supply and dependence on Russian gas reaching 41% of total gas imports in 2020, the EU is increasingly turning to LNG in a bid to bridge its natural gas supply shortfall.
GlobalData predicts that in 2030, only 38% of Europe's natural gas demand will be met by domestic supply. As a result, the bloc must seek new import partners to guarantee its energy security while decreasing its reliance on Russian natural gas. Diversification of its gas supply by increasing imports of LNG has been identified as an integral step for the bloc's energy independence. The EU, as well as individual European countries, negotiated 72 energy deals between March 2022 and January 2023. Many of the new energy deals related to natural gas and specifically LNG. For example, in March 2022, the EU and US issued a common declaration to increase LNG trade. The agreement marks an expansion of a deal negotiated in 2018, which will see the US supply 50bcm of LNG in the run up to 2030.
Due to its reliance on natural gas via pipeline, Europe currently has underdeveloped LNG infrastructure. For example, the bloc's largest economy, Germany, did not have an active LNG regasification plant before December 2022. Since then, European countries have been increasing their LNG import capacity chiefly through constructing floating LNG storage and regasification units. However, this heavy investment in LNG infrastructure may not guarantee immediate energy security. LNG terminals take 3-5 years to construct and so the bloc may still struggle to meet its demand. In addition, the investment in LNG has also raised questions about the bloc's commitment to it's decarbonization.