US likely to become Europe’s most important LNG supplier – report

The US is set to become Europe’s largest supplier of liquefied natural gas (LNG) if gas imports from Russia are not available or remain limited in the coming years, according to a scenario analysis by the Institute of Energy Economics (EWI) at the University of Cologne, which was commissioned by gas industry association Zukunft Gas. “In all scenarios, LNG imports from the US increase compared to 2021 and reach a share of total EU imports of around 40 percent if no gas is traded between Russia and the EU,” conclude the authors after analysing the impact of different assumptions on future supply and demand on gas trade and wholesale prices in 2026 and 2030. “In this case, the EU becomes one of the most important markets for natural gas from the USA, along with Asia.” The realisation of new liquefaction projects in the US is a prerequisite for increasing LNG exports, but the expected drop in European demand in the medium to long term due to climate action results in considerable uncertainties for the necessary investments, the researchers say.

Europe can only increase import volumes from pipeline-bound supply sources such as Norway, Azerbaijan or Algeria to a limited extent, the researchers said. “Norway is expected to be able to increase its production until 2028 but will experience production declines thereafter. Imports from the North African exporting countries are expected to decrease as their domestic demand increases.” Qatar could increase its exports to Europe, but has already tied up a large part of available volumes to Asian importers in long-term contracts. “Possible additional imports for the EU from other LNG exporting countries such as Australia or Canada are not expected to be significant, as these exporters primarily serve the Asian market.” The researchers said they expected a price decrease from 2024, as the roll-out of LNG terminals in Europe will resolve supply bottlenecks.

The war against Ukraine has elevated efforts to diversify Europe’s gas supply away from Russian deliveries to the top of the agenda. Germany has a well-developed natural gas pipeline grid and is connected to import terminals in neighbouring countries, but does not currently have its own port to receive LNG directly. In addition to one or more fixed onshore terminals, the government plans to lease five floating terminals in the short term, two of which could be installed as early as this winter (2022/2023). A sixth private floating terminal could also start operation in the winter.