EU Imports of Russian LNG Sore to Record Highs; Supply Mostly from Arctic

Arc7 LNG Carrier Christophe de Margerie on Russia’s Northern Sea Route. (Source: Novatek)

During the first nine months of 2022 Europe’s LNG imports from Russia increased by 50 percent. Some EU countries that previously did not import any or only small quantities of natural gas from Russia now receive regular shipments of LNG from the country.

While European imports of Russian pipeline gas have declined by more than 80 percent, shipments of Russian LNG (liquefied natural gas) to Europe have ballooned by 50 percent during the first 9 months of 2022 new data show.

As much as the EU has been successful in replacing the majority of its Russian pipeline gas imports with product from other suppliers, it has been unable to wean itself off Russian LNG deliveries. 

The imports of Russian LNG are part of a sustained push by the EU to replace Russian pipeline gas with gas in the form of LNG. 

While the EU now receives a large number of shipments from the US and Qatar, deliveries from Russia, including from Novatek’s Yamal LNG project in the Arctic, run counter to the overall narrative that the EU is reducing all forms of energy imports from and associated payments to Russia. 

“It is certainly a concern that Russian LNG sales are growing, including to Spain and Belgium and other countries that have been fully engaged in NATO and EU efforts to sanction Russia and put pressure on it to stop its aggression in Ukraine,” explains Kristine Berzina, senior fellow for security and defense policy at the German Marshall Fund of the United States (GMF).

This matters as a sign of incomplete European solidarity
Kristine Berzina, the German Marshall Fund of the United States

In fact countries that previously did not import any Russian natural gas via pipeline are now buying LNG, elaborates Berzina.

“Spain was not a Russian pipeline customer but is buying Russian LNG now. A Russian LNG tanker recently went to Greece. This matters as a sign of incomplete European solidarity, and it is disappointing to those who want to see sanctions have the biggest possible effect.”

Paying for expensive LNG 

The 50 percent increase in LNG imports from Russia highlights how the Kremlin continues to exploit Europe’s dependency on natural gas. 

By shutting down the supply of cheaper pipeline gas e.g. through the Nord Stream 1 and 2 pipelines, and replacing part of the supply with LNG shipments, Russia is able to leverage record prices for in-demand shipments. Liquefied natural gas is generally more expensive than gas delivered via pipeline. 

Shipments to Europe and Asia have allowed Russia to keep its exports of LNG at record high levels. Almost 80 percent of Russian LNG exports have gone to Europe and Asia. The country shipped an average of 2.78m tons of LNG per month in 2022, up from 2.62 million in 2021 and 2.56 million in 2019.

Major gas importers like Germany do not have LNG import terminals
Kristine Berzina, the German Marshall Fund of the United States

Europe also competes with buyers in Asia, e.g. Japan, who have historically relied on LNG deliveries, including from Russia.

This has allowed the Kremlin to engage in a type of energy “cat-and-mouse game”, by temporarily, or in the case of Nord Stream 1 and 2 permanently following the sabotage to the pipelines, shutting off some avenues of supply while expanding others and charging higher prices.

In September 2022 alone EU countries purchased almost USD1bn worth of LNG from Russia.

Even more challenging in 2023

The demand for LNG in the EU will likely increase further in 2023. In 2022 the bloc was able to use Russian pipeline gas in the earlier part of the summer to begin filling its gas storage tanks before pipeline flows began to dwindle. Next year, no such buffer will exist.

The mad dash for LNG shipments has resulted in extensive traffic jams across Europe’s regasification terminals where LNG carriers can offload their cargo. 

Imports of LNG have risen most in Spain, France and Portugal. However, many EU countries do not operate regasification plants laying bare how EU countries have neglected investments in this area. Instead, countries like Germany, which does not have a single LNG terminal, relied exclusively on deliveries of pipeline gas. 

“Not all countries can just use Russian LNG rather than Russian pipeline gas. Major gas importers like Germany do not have LNG import terminals,” Berzina elaborates.

The EU has a clear roadmap to reduce its dependence on Russia
Raphel Hanoteaux, E3G

In contrast Spain operates six LNG terminals. And even with that capacity, more than a dozen vessels are currently cued off the country’s coast waiting to offload their cargo. 

The absence of a pipeline system connecting Spain to other European countries also means that countries like Germany can not easily receive gas that arrives in Spain in the form of LNG. Plans to build additional pipeline infrastructure connecting Portugal and Spain to France and Germany are in the works, but will take several years to materialize. 

Demand reduction will be key

The global LNG market is likely to tighten significantly in the months to come. China last week announced that it would halt the sale of LNG to foreign buyers in an effort to reduce the flow of LNG out of the country. 

Efforts to overcome the dependency on Russian gas, both pipeline and LNG, in the long-term will require substantial reductions in consumption experts say.

“The EU has a clear roadmap to reduce its dependence on Russia,” says Raphel Hanoteaux, Senior Policy Advisor on gas politics at Third Generation Environmentalism E3G, an independent climate change think tank. 

“Implementation of the Climate Law would put the EU on track to reduce its gas consumption by around 35 percent compared to 2019,” Hanoteaux concludes. 

Additional actions by the EU described in the REpowerEU plan published by the EU Commission earlier this year might allow the blox to decrease its gas consumption by 52 percent.

However, as these plans for demand reduction are laid out for 2030, it appears that for now Europe will remain, at least moderately, dependent on Russian gas, especially in the form of LNG.

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