The Batajnica gas storage facility, operated by Transportgas, in Batajnica, Serbia. The European Union is planning to cut Russian natural gas imports.
The 27-member European Union is geared for incremental, some might say glacial, policy shifts. Vladimir Putin’s war on Ukraine is changing that—at least on paper, with respect to Russian natural gas.
The Paris-based International Energy Agency unveiled a plan on March 3 to cut the EU’s Russian gas imports by a third in one year. The EU raised that to two-thirds a few days later. The targets may be aspirational, but the political signal looks serious.
“This is the beginning of the end for Russian gas in Europe,” says Jonathan Stern, who founded the Gas Research Program at the Oxford Institute for Energy Studies. “It’s just a question of how long it will take.”
And how much it will cost.
The EU and Russia have been stuck in energy codependency. Europe gobbles two-thirds of Russia’s gas exports. These provide 40% of EU gas consumption while domestic fields in the North Sea dwindle.
Proposed means for breaking the cycle range from keeping aging nuclear plants humming to putting on extra sweaters and lowering thermostats. The crux of the matter, short- and medium-term, is buying more liquefied natural gas to replace Russian pipeline supplies.
The problem is that LNG production, concentrated in Australia, Qatar, and increasingly the U.S., is already answered for. Stern estimates global output might rise by 42 billion cubic meters, a little less than 10%, this year. The EU wants to cut 50 BCM from Russia, not to mention growing LNG demand from China and other Asian growth economies.
Increasing supply takes time and big bucks, notes Randy Giveans, head of energy maritime equity research at Jefferies. “A new onshore LNG facility takes four to five years to process,” he says.