Natural gas is the largest energy source for Europe. Bigger than crude oil and coal. In 2021, Europe received 45% of its natural gas from Russia. Germany, Europe’s largest economy, gets 55% of its gas from Russia. After Russia invaded Ukraine, Germany announced plans to replace all Russian gas imports by mid-2024. The broader European Union plans to replace 2/3 of Russian gas imports as soon as the end of this year. But these European countries are having difficulties to find these replacements.
The majority replacement energy product will be liquefied natural gas (LNG). This type of natural gas can be liquefied and loaded onto ships. Once it arrives, it is turned into gas at the destinations again and filled into pipelines. Europe is already the largest LNG importer and becomes an even larger importer now.
Unfortunately, there are bottlenecks in importing LNG. There are simply not enough regasification facilities available to process all of the LNG imports needed to replace Russian supplies. Concerns about supply have driven the price of natural gas in Europe up about 35% within a year. Additionally, increased demand for LNG has caused a shortage of tankers, which has pushed shipping rates for LNG to record levels.
But who will benefit of all this and delivers LNG to the world?
The United States is the world’s largest producer of natural gas. It produces more than Russia. The U.S. has become the largest exporter of LNG and Europe will depend heavily on imports of U.S.
This will not be just a temporary shift in the energy markets. Europeans realised how dependent they were on Russian energy but have become determined to never again be so vulnerable.
The U.S. natural gas suppliers will be the real winners of this energy crisis.
Sven Franssen