The saving LNG will not come: the US is trying to sell "air" to Europe

Alexey Gromov, Principal Director on Energy Studies and Alexey Belogoryev, Deputy Principal Director on Energy Studies of the Institute for Energy and Finance commented to the BaltNews Internet portal on the prospects for replacing Russian pipeline gas with LNG in the EU.

It is almost impossible to completely replace Russian gas in Europe. Pipelines from other countries will not be able to cover such volumes, and even the EU countries will not want to buy LNG under long-term contracts. However, for Qatar, like for the United States, it is more profitable to sell liquefied gas to Asia.

“If we talk about northwestern Europe, then there will be no problems with the reception and regasification of LNG. But the density of gas pipeline networks in the region is different. In the West it is especially dense, but in Eastern and Southeastern Europe it is minimal. Of course, the interconnectors have been under construction for a year, and some of them have already been put into operation. But they are intended primarily for transferring Norwegian gas to Poland, the Czech Republic, Austria. There are also south-north links for supplies from Bulgaria to Romania, Hungary or Poland The EU is making efforts to develop such ways, but they are not enough. Eastern Europe remains a zone of loosely connected networks," Alexey Belogoryev said.

“If we talk about the role of Qatari LNG, then, apart from Poland and Lithuania, additional supplies of this gas will not fundamentally change the situation for anyone. Perhaps these are the only countries in the EU where it is possible to replace pipeline gas. For example, the German market is too large. There are plants, operating in reverse mode. Theoretically, gas can be supplied from the Benelux countries (the union of Belgium, the Netherlands and Luxembourg), but Germany simply does not need this," the expert believes.

Alexey Gromov told Baltnews, that EU countries have long-term contracts for the supply of LNG, but only those that do not have access to pipelines - Spain, Portugal. However, for everyone else to enter into such transactions is meaningless.

“Firstly, most European countries do not enter into long-term contracts for the supply of LNG, since their average consumption, except for peak demand, is covered by existing deals with Norway, Algeria, Russia and other suppliers. Any long-term contract involves a “take or pay” scheme. "Why would Europe make another deal like this if there is already enough gas? This position is fraught with risks. In 2021, the risk paid off, as there was a shortage of supply to cover peak demand, but such situations are almost unprecedented," the expert noted.

“Secondly, pipeline gas is almost always, in the current market price architecture, cheaper than LNG due to the nature of transportation. If we consider a calm market, and not the period of a perfect storm, which was observed in 2021 and continues in 2022, then the “blue fuel” supplied through the pipeline will cost less,” Alexey Gromov believes.

The expert says that for EU countries there is no point in such long-term contracts. Even American LNG came to Europe in 2021 only when demand and price in Asia decreased.