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Can Europe break its dependence on Russian gas?

Could Europe manage without Russian gas? This very question has been on the agenda of many meetings of various agencies in the European Union. In the end of 2021, the European Commission developed a plan to counteract climate change and is going to phase out natural gas by 2050.

Credit: depositphotos.com
Credit: depositphotos.com

Russia, Norway, Algeria and Libya are currently the main suppliers of natural gas to Europe; the share of other countries is minor. We regularly hear and read about the ideas to transport and supply liquefied natural gas (LNG) to Europe from the US, Qatar and even Australia. Yes, some corridors do work, mostly from Qatar; Australia also wants to enter this market, but logistics is an issue here.

Qatar is currently the leader on this market, supplying LNG to 27 countries — members of the European Union. In 2020, Qatar exported some 17.5 bln cubic meters of LNG to the EU; in 2019, it was 25.7 bln cubic meters. At the same time, Russia has almost doubled its LNG supply: from 7.8 to 14.1 bln cubic meters in 2019 and 2020, respectively. Is it a lot or a little? Let’s compare the LNG deliveries to the European Union with the deliveries through pipelines.

The total volume of natural gas deliveries through pipelines to the European Union was 379.9 bln cubic meters in 2020; in 2010, it was 521 bln cubic meters. Obviously, the share of LNG supply to the EU is small as compared to pipeline gas. According to Eurostat, Russia’s share in the first six months of 2021 was 46.8%.

So what does the European Commission want to do to reduce its dependence on gas?

The first step is to more actively replace natural gas with hydrogen; the second step will be abandoning long-term gas contracts to create an open and free market to reduce Gazprom’s influence on the European gas market; the third step is to create a strategic gas reserve, similar to the US’s strategic petroleum reserve, to avoid repeating the history of the winter 2021/2022.

Gas currently accounts for 25% of Europe’s final energy consumption; it supplies 20% of the EU’s electricity and is the leading source for heating with a share of 40%. 95% of gas used in Europe accounts for fossil gas and only 5% are low-carbon gases.

Against the backdrop of the news and price and production reports, Germany has announced that it will reach net zero emissions by 2045, five years earlier than the deadline set by the European Commission, which, of course, includes abandoning gas imports.

In light of all of the above, it seems obvious that Europe will not be able to do without Russian gas for the next 5–10 years, but if it invests significant funds in the transition to LNG and hydrogen fuels, it might greatly reduce its dependence on Russian pipeline gas in the next 25-30 years.

The period of 25–30 years is connected to the implementation of the main pan-European infrastructure projects such as the construction of nuclear and tidal power plants, building more wind farms and replacing natural gas with hydrogen.

To sum up: in the next few years Europe will not be able to cope without Russian gas, but in the medium term, the European Union will implement several main changes in its energy sector, both related to Russia and to the transition to green technologies, so this is what Russian exporters should be preparing for.

By Andrey Kovalev, Managing Partner, BusinessInvitee

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