{"id":12527,"date":"2022-05-23T11:36:34","date_gmt":"2022-05-23T10:36:34","guid":{"rendered":"https:\/\/www.westwoodenergy.com\/?p=12527"},"modified":"2025-04-25T16:42:28","modified_gmt":"2025-04-25T15:42:28","slug":"energy-transition-insights-europes-need-for-gas-may-not-be-the-opportunity-you-expect","status":"publish","type":"post","link":"https:\/\/www.westwoodenergy.com\/news\/energy-transition-insights\/energy-transition-insights-europes-need-for-gas-may-not-be-the-opportunity-you-expect","title":{"rendered":"Energy Transition Insights – Europe\u2019s need for gas may not be the opportunity you expect"},"content":{"rendered":"[vc_row type=”in_container” full_screen_row_position=”middle” column_margin=”default” column_direction=”default” column_direction_tablet=”default” column_direction_phone=”default” scene_position=”center” text_color=”dark” text_align=”left” row_border_radius=”none” row_border_radius_applies=”bg” overflow=”visible” overlay_strength=”0.3″ gradient_direction=”left_to_right” shape_divider_position=”bottom” bg_image_animation=”none”][vc_column column_padding=”no-extra-padding” column_padding_tablet=”inherit” column_padding_phone=”inherit” column_padding_position=”all” column_element_direction_desktop=”default” column_element_spacing=”default” desktop_text_alignment=”default” tablet_text_alignment=”default” phone_text_alignment=”default” background_color_opacity=”1″ background_hover_color_opacity=”1″ column_backdrop_filter=”none” column_shadow=”none” column_border_radius=”none” column_link_target=”_self” column_position=”default” gradient_direction=”left_to_right” overlay_strength=”0.3″ width=”1\/1″ tablet_width_inherit=”default” animation_type=”default” bg_image_animation=”none” border_type=”simple” column_border_width=”none” column_border_style=”solid”][divider line_type=”Small Line” line_alignment=”default” line_thickness=”1″ divider_color=”default” custom_height=”50″][vc_column_text]Europe\u2019s recently difficult relationship with Russia took a turn for the worse at the end of last month. Citing a failure to pay for supplies in roubles, Russian energy giant Gazprom halted all exports of gas to Poland and Bulgaria. That action, which the Financial Times<\/a> <\/strong>described as part of the Putin administration\u2019s \u201cefforts to weaponise energy supplies over the invasion of Ukraine,\u201d added urgency to Europe\u2019s attempts to sever its dependence on Russian fossil fuels.<\/p>\n

Amid fears other countries could be hit by similar shutdowns as the conflict in Ukraine escalates, European Commission President Ursula von der Leyen made Europe\u2019s position clear. \u201cThe era of Russian fossil fuel in Europe is coming to an end,\u201d she announced<\/strong><\/a>.<\/p>\n

Poland and Bulgaria both claimed they could source alternative supplies, although it will not be easy. Poland\u2019s state-owned gas company, Polskie G\u00f3rnictwo Naftowe i Gazownictwo, got 53%<\/a> <\/strong>of its gas from Gazprom in the first quarter of this year. In the short term, Poland could make up its supply shortage with liquified natural gas (LNG) imported from Qatar, thanks to an LNG terminal that opened in \u015awinouj\u015bcie in 2015. A pipeline under development could bring further supplies from Norway by the end of the year.<\/p>\n

Elsewhere, countries such as Germany, Italy and the Netherlands are rushing to sign up floating storage and regasification units (FSRUs) so they do not have to rely on gas piped from Russia. \u201cEurope is screaming for FSRUs to get energy in, whatever it costs,\u201d said Yngvil Asheim of Oslo-based FSRU owner BW LNG in March<\/a><\/strong>.<\/p>\n

Some fossil-fuel producing nations are readying themselves to replace Russian oil and gas, either by offering alternative imports, or to boost domestic production. In the UK, for example, cabinet minister Jacob Rees-Mogg sad the government was now aiming to drill for \u201cevery last drop<\/a><\/strong>\u201d of North Sea oil and gas.<\/p>\n

A muted response from the industry<\/strong><\/h2>\n

The US, meanwhile, rekindled relations with Venezuela<\/strong><\/a> in March after a two-decade standoff, partly to discuss lifting sanctions on Venezuelan oil supplies. Oil and gas demand from Europe could support the development of some discoveries, or even new exploration, with a new licencing round now mooted in the UK. Overall oil and gas companies, however, have been somewhat muted in their response to Europe\u2019s calls for alternative fossil fuel supplies.<\/p>\n

In the US, for example, oil production \u201cis essentially flat<\/a><\/strong>,\u201d the New York Times<\/em> reported. \u201cUS energy companies and Wall Street investors are not sure that prices will stay high long enough for them to make a profit from drilling lots of new wells,\u201d explained the New York Times<\/em>.<\/p>\n

Similarly, observers have cautioned about rushing to build European terminals for American LNG, even though the US pledged in March to boost exports to the European Union by 15 billion cubic metres this year, rising to 50 billion by 2030. One issue is that the volume of Russian gas flowing to Europe is so great that US supplies cannot replace it. Another is that by the time the terminals have been built Europe will have found other ways of coping with the shortfall. Both are valid concerns.<\/p>\n

Russia has shown it won\u2019t hesitate to use its gas supplies for leverage in the Ukraine conflict, and with the Kremlin seeing scant progress against its invasion plans there is a growing sense that Europe will need to find alternatives in days or weeks, not years. As outlined in our last Energy Transition Insight<\/a><\/strong>, oil and gas companies can help in this process\u2014but not necessarily by using oil and gas.<\/p>\n

The European Union is already leading the charge towards low-carbon hydrogen<\/strong><\/a> and although business cases and applications are only just emerging it is hard to imagine policymakers would say no to investments that advance the development of the fuel. Germany\u2019s RWE appears to have grasped this early on, announcing plans<\/a><\/strong> for a green ammonia import terminal at Brunsb\u00fcttel within weeks of Russia\u2019s invasion of Ukraine. The RWE facility will sit alongside an LNG terminal, one of two that Germany rushed to greenlight in the wake of the invasion.<\/p>\n

LNG in Europe: a short-term fix only?<\/strong><\/h2>\n

RWE says its ammonia terminal should be ready to receive supplies by 2026. In the meantime, LNG imports are certainly rising in Europe to try and replace Russian volumes. The trend to reduce reliance on Russian gas and diversification of supply is a core part of Europe\u2019s REPowerEU strategy<\/a><\/strong>.<\/p>\n

However, without sufficient LNG available to fully replace Russian gas until new supplies are brought on in coming years, there will be a period of tight supply, high prices and heightened market uncertainty. This is politically unappealing, plus it will also impact demand: total natural gas consumption this year is already expected to fall by close to 6% in Europe, the IEA says<\/strong><\/a>.<\/p>\n

Therefore, it is worth noting the broader aims of Europe\u2019s REPowerEU strategy, which is focused on biomethane, renewable hydrogen and \u201creducing faster the use of fossil\u2026 by boosting energy efficiency, increasing renewables and electrification, and addressing infrastructure bottlenecks.\u201d These all point to upsides for anything but natural gas demand.<\/p>\n

European nations are moving to implement some of these measures. In Spain, for example, the government last month took steps to slash renewable energy plant permitting periods<\/a><\/strong> in half.<\/p>\n

While some commentators view the changing dynamics in the European market as a new opportunity for natural gas and LNG producers, it is not clear if this is a short-term spike or longer-term opportunity. The outlook is very uncertain, especially considering the European Union\u2019s objective of phasing out most fossil fuels completely by 2050. The question is: has the war in Ukraine now accelerated this ambition?[\/vc_column_text][vc_column_text]\n

The digest: this month\u2019s key headlines<\/h3>\n