January 5, 2023

Global LNG represents 39% of EU gas imports in 2022

The share of global LNG in the European Union’s gas import mix rose to unprecedented levels in 2022 as the bloc increasingly relies on LNG to replace most of the lost Russian pipeline supplies.

EU gas imports remained stable year on year last year at around 337.4 bn m3, preliminary data from the European Network of Transmission System Operators for Gas (ENTSOG) show. The bloc traditionally imports most of its gas, and it imported at least 70% of it via pipelines prior to 2022, most of it from Russia. But last year, Russia more than halved its exports to the EU, and the bloc turned to LNG to replace most of the lost Russian supplies as non-Russian pipeline capacities were limited.

This meant that pipeline gas represented only 61% of EU gas imports last year, down from 77% the year prior. Meanwhile, the bloc’s LNG imports rose to an all-time high of 94.73 mt or around 130 bn m3 of regasified gas, representing 39% of the bloc’s gas imports compared to 23% in 2021.

Pipeline deliveries to the bloc dropped by 50 bn m3 or almost 20% year on year. This was mostly due to Russian supplies which plummeted to around 66.6 bn m3, or less than half of the supplies sent in 2021.

The shutdown and sabotage of the EU’s largest import pipeline, the 55 bn m3 Nord Stream 1 connecting Russia to Germany under the Baltic Sea, represented a loss of about 28.5 bn m3 of Russian supplies last year, or half of the volumes the pipeline had transported in 2021. Nord Stream 1 was Russia’s most optimised pipeline and operated above its design capacity since 2018. But last year, it carried only about 29.2 bn m3 before its shutdown.

Russia also halved supplies via Ukraine to approximately 20.3 bn m3 compared to around 40.8 bn m3 in 2021. Piped deliveries to the Baltics decreased by 43% year on year to about 1.8 bn m3, while flows to Poland dove by 91% to around 2.5 bn m3, as Russia stopped using the Yamal-Europe pipeline to supply the EU in May.

Russia cut supplies to several EU companies amid payment disagreements, which also played a role in the year-on-year steep drop in supplies. Finland’s Gasum was one of the companies that were cut off, and so Finland received only 425.5 m m3 of piped supplies, or 75% less than in 2021.

Flows via the TurkStream pipeline linking Russia to the EU via Turkey, stayed roughly stable at 12.4 bn m3. Bulgaria was cut off from these supplies but Hungary increased its imports via this route.

Norway became the EU’s top pipeline supplier last year, with approximately 70 bn m3 exported to the bloc, or 5% less than in 2021. Flows to France, Belgium, and Germany increased. Only flows destined for the Netherlands fell by 8 bn m3 year on year to 11.9 bn m3, but the country boosted its LNG import capacities last year and doubled its LNG imports by roughly the equivalent of the lost Norwegian piped deliveries.

North African piped exports to the EU dropped by 8% year on year to about 35.2 bn m3. This was largely due to the end of the Moroccan transit contract with Algeria in late October 2021, which left the Algeria-Morocco-Spain MEG pipeline unused since then. The transit deal was not renewed amid tensions between Algeria and Morocco.

Net imports from the UK, with which the EU has two bidirectional pipelines, rose to just short of 24 bn m3, while in 2021 the EU had exported a net 1.6 bn m3 to its neighbour. Higher prices on the Dutch TTF gas hub, the EU benchmark, coupled with the UK’s abundant access to LNG supplies incentivised eastward pipeline flows. The UK’s LNG import capacity is Europe's second-largest, and 15 bn m3 or 45% larger than the Netherlands' and Belgium's combined. The UK-EU pipelines land in the Netherlands and Belgium. The EU's severe gas shortage and its solidarity rules for sharing gas between member states mean piped flows from the EU to the UK are less likely to take place like they used to prior to 2022, which could in turn increase the UK’s reliance on LNG.

Azerbaijan boosted its piped exports to the bloc by 40% year on year to 11.7 bn m3. In July, the European Commission and Azerbaijan signed a memorandum of understanding to double the capacity of the transit corridor linking Azerbaijan to the EU to deliver at least 20 bn m3 a year by 2027. A call of interest for the capacity increase opened in November and market participants can submit bids later this month. The capacity increase could limit LNG demand in Greece, Italy, and Bulgaria.

Looking forward, the share of global LNG in the EU gas import mix is likely to stay strong at least in the next couple of years due to a combination of factors. The bloc is focusing its efforts on ending its reliance on Russian gas as fast as possible and has turned to short-to-medium-term solutions to replace these volumes like floating LNG terminals while it accelerates its energy transition to non-fossil fuels. And non-Russian pipelines have limited capacity to increase deliveries in the near future and/or the supplying countries' upstream production is limited or their domestic demand limits volumes available for exports.

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