European gas reserves are being consumed at the fastest rate since Russia’s invasion of Ukraine. Interestingly, the European Union (EU) is the largest buyer of Russian gas (and this dependence appears to last).
The energy crisis in Europe, triggered by Russia’s invasion of Ukraine, continues to put pressure on the old continent’s energy reserves, almost three years after European countries imposed the first sanctions against Russian gas.
A search for gas Liquefied natural gas (LNG), for example, is expected to increase 13% by 2025, after declining last year, according to the Independent Commodity Intelligence Services (ICIS) group.
This happens at the same time as the reservoirs of gas in European Union (EU) countries are emptying at the fastest rate since the start of the war.
Unlike natural gas, which is transported by pipeline, LNG is cooled to liquid form, which allows it to be transported by ship.
A growing demand for LNG has been a constant theme in recent yearsand should continue to be so until 2030, predicts Ed Coxglobal markets analyst at ICIS. Speaking to , the expert believes that, by that time, global suppliers (led mainly by the USA and Qatar) will have managed to increase their production significantly to satisfy demand.
Until then, Russian LNG remains the lifeline for many European countries.
Although the EU has reduced the total amount of Russian gas it imports since the start of the war in 2022, most of this reduction is related to natural gas, transported by pipeline.
Russian LNG, on the other hand, continues to be purchased by European countries, as there are no vetoes on direct imports of merchandise.
Current sanctions against liquefied gas mainly focus on re-export, which prevents EU companies from purchasing the product and transferring it from one ship to another for resale outside the EU.
Russia continues to smile
These sanctions did not prevent the volumes of liquefied gas sold by Russia from increasing drastically, reaching a historic maximum in 2024.
Figures from the Center for Research on Energy and Clean Air (Crea), cited by Deutsche Welle, show that EU imports of Russian LNG will reach 7.32 billion euros in 2024, an increase of 14% compared to the previous year. .
Like this, the EU is the world’s largest buyer of Russian LNGahead of China, Japan and South Korea.
“Europe is more dependent on LNG imports now than beforedue to the drop in Russian gas imports [transportado por gasodutos],” Ed Cox told DW. This scenario, he explains, leaves the continent more exposed to fluctuations in the price of LNG on the world market.
EU under pressure
EU countries, however, have been pushing Brussels to adopt an outright ban on imports of Russian products, which could force European buyers to find new suppliers more quickly than expected.
In the same newspaper, Isaac Levian analyst at Crea, also argued that the bloc needs to be more proactive and “actively implement” measures that prevent European countries from purchasing liquefied gas from the country led by Vladimir Putin.
Levi believes that many European countries will continue to be attracted to the slightly cheaper rates of Russian LNG, but argues that the entire EU could end its dependence in the future. “It’s a question of political will.”
“It should be compensated by LNG from the US and Qatar”said Cox.
How to prepare the continent?
Much of the continent’s preparation to overcome dependence on Russian gas has focused on storage capacity expansion of the EU. The cold weather at the end of the year caused levels of stock fell more than in the two previous winters at the same time of year.
On the other hand, storage levels in the EU have been exceptionally high in recent winters due to fears of supply shortages as a result of the war. Gas prices are also about 90% lower than at the height of the energy crisis in 2022, although they are almost three times higher than in the years before the invasion.
For Ed Cox, despite the risk of price increases, the continent will be able to meet its needs. “Europe will receive enough LNG, but this may mean that European prices will have to increase to compete with Asia,” he said.
“Diversion” of loads
Cox states that prices on the international market have been “volatile”, in particular due to bidding fraud that occur during the transport of LNG between the USA and Europe.
When companies like Shell, BP or Chinese operators buy LNG from the US, they are not required to have a pre-determined destination. This means they can resell it to whoever makes the best offereven when the product is already in transit.
“These companies are always looking for opportunities around the world. If they see that the price in Europe is too high and they can find a buyer in Europe in the short term, they divert the cargo there. We can literally see the cargo changing direction in the middle of the Atlantic,” said Cox.
Faced with high demand, European buyers are typically willing to pay a premium above other global markets to divert LNG to their ports. This has led to renewed criticism that Richer European nations are diverting supplies from countries that need the productparticularly in South Asia and Latin America.
Cox admits this is also a problem with countries like Japan and South Korea. “Rich markets in East Asia and Europe are crowding out other buyers,” he said, adding that countries like India, Bangladesh and Pakistan have always been “price sensitive” and don’t mind switching to coal and oil-fired power production when it’s cheaper.
