Rebalancing Europe’s Gas Supply Second Edition

Is Europe out of
the woods yet?

December 2023

The resilience of Europe’s energy system will remain precarious
until sufficient long-term supply is secured.

Europe can help improve it by being realistic about its long-term natural gas needs
on the way to climate neutrality.

"

main findings

In the aftermath of Russia’s invasion of Ukraine and subsequent reduction of gas imports from Russia, we mapped out Europe’s options to rebalance its gas supply over the medium and longer term, and formulated a corresponding set of recommendations for policymakers.

Research Questions

What learnings can we draw from the 2022-2023 winter?

What options are available to substitute Russian gas supplies?

How can Europe attract these supplies and strengthen its energy resilience?

Main findings

2022 – 2023

Market functioning and gas industry’s actions mitigated the supply crisis but the situation remains precarious

  • High prices enabled the European gas market to balance by attracting LNG cargoes from the global market and reducing demand. Europe’s LNG terminals are now key to balance supply and demand.
  • Industrial demand reduction and destruction had severe economic impact.
  • Asian buyers have been more active than European ones, concluding contracts securing twice as much future LNG supply.

Europe’s demand dropped 13% in 2022 while it imported +60% (+56bcm) LNG.

2023 – 2027

Europe’s gas supply will remain exposed to external factors and competition with Asia for limited volumes in the short term

  • In case of higher demand in both Europe and Asia, global LNG supplies would be insufficient, leading to higher prices and corresponding economic impact.
  • The global LNG market will remain tight as Europe and Asia compete until at least 2027.
  • Europe must fully utilize its storage capacity in to compensate for the loss of short term flexibility options.

Europe has only secured 33% of the LNG supplies it will need until 2027.

2028 – 2040

Exposure to global LNG market volatility and reliance on Chinese reselling will persist unless reduced by securing sufficient long-term LNG supplies and developing Europe’s domestic resources

  • Unrealistic European demand scenarios as well as legislative barriers create uncertainty and undermine investors’ ability to secure long-term supplies.
  • Numerous global LNG supply projects can materialize if underpinned by long-term contracts.
  • Developing domestic supplies can reduce the need for imports, GHG emissions, and the energy import bill for Europe, while increasing the energy system’s resilience.

Europe only contracted 32% of the LNG it needs over 2028-2040.

A study by:

Supported by:

With technical input from: