How the US can rid Europe of Russian gas

Alexey Belogoryev, Deputy Principal Director on Energy Studies at the Institute for Energy and Finance, commented to Vzglyad.ru on Russian gas supplies to Europe.

The US continues to intimidate Russia by stopping gas supplies and reassure Europe with promises to take care of it in this case. In January, Europe received a record volume of overseas LNG. However, will the US be able to repeat this success throughout the year and save Europe from the dominance of Russian pipeline gas?

LNG's success in January can be called a one-time event. As the expert explains, it was delivered so much simply because at the end of 2021 and the beginning of 2022, new LNG gasification capacities were introduced, in particular in the United States. And this “new” volume of LNG went to Europe, where prices rose and turned out to be comfortable for them. The diversions of LNG tankers specifically from Asia to Europe were actually insignificant, mainly LNG went to Europe from the US directly.

“It is very difficult to replace Russian gas during the heating season. There is no other alternative pipeline gas. It is also almost impossible to replace LNG with additional deliveries. We must also take into account the extremely low gas reserves in underground storage facilities in Europe, which cannot help Europeans out this winter,” Alexey Belogoryev says.

It is also important to understand exactly, what volumes of Russian gas exports to Europe the US wants to ban.

“The scenario of a complete cessation of Russian gas supplies to Europe means the introduction of rationed gas consumption by Europeans. We are talking about mass shutdowns of industry, power plants and, most likely, the population. This is a wartime scenario, which is unacceptable from an economic point of view,” Belogoryev notes.

If we are talking about the fact that Nord Stream 2 will not be put into operation in September-October 2022, as expected in terms of the maximum certification period, then the situation is already different. “There are no problems with the supply of Russian gas without this gas pipeline this winter, and there were none in previous winters. But if Nord Stream 2 does not start operating in October 2022, then this will again lead to high gas prices in the next heating season. Much will also depend on the occupancy of European UGS facilities and on demand in countries that compete with Europe, but gas prices can again rise to $1,000 per thousand cubic meters,” the source says.

Actually, the launch of the gas pipeline during this heating season would help bring down prices in Europe. And it can help to do this in the winter of 2022–2023, if it works.