EU May Need 350 Extra LNG Cargoes to Replenish Reserves, Equinor Says

The European Union (EU) may need an additional 350 LNG cargoes to replenish its natural gas reserves, according to Norwegian energy company Equinor. This comes as the EU continues to diversify its gas supply sources away from Russia, following the events in Ukraine. The increased demand for LNG cargoes in the EU is driven by several key factors, including the need to secure gas supply and reduce dependence on Russian pipeline gas.

The EU's reliance on LNG imports has significantly impacted its energy security and geopolitical relations, particularly with Russia and other major LNG exporters. The shift away from Russian pipeline gas has strained geopolitical relations with Russia, which has threatened to cut off gas supplies in response. Despite the EU's efforts to reduce reliance on Russian gas, it still imported 18 bcm of Russian LNG in 2023, mostly via long-term supply agreements signed before 2022. At least 1 bcm (but possibly more) of this Russian LNG is re-exported to Asian markets through LNG reloads.

The EU's increased demand for LNG has strengthened its relations with major LNG exporters, such as the United States, Qatar, and Australia. In 2023, the US emerged as the leading supplier of LNG to the EU, replacing Russia. The EU has signed long-term LNG sale and purchase agreements with major exporters, such as Cheniere Energy, further solidifying its ties with these countries.

Emerging technologies such as small-scale LNG and floating storage and regasification units (FSRUs) play a significant role in enhancing the EU's LNG infrastructure and supply flexibility. Over 50 bcm of new LNG import infrastructure was added since mid-2022, contributing to these positive developments. Around 75% of the new regasification capacity added in the EU since 2022 are FSRUs, allowing for potential repurposing or relocation should their utilisation significantly decline. Small-scale LNG enables the development of new LNG import infrastructure in locations that may not have been feasible with traditional LNG terminals, further diversifying the EU's LNG import routes.

In conclusion, the EU's reliance on LNG imports has significantly impacted its energy security and geopolitical relations, particularly with Russia and other major LNG exporters. The increased demand for LNG cargoes in the EU is driven by short-term factors such as diversification away from Russian gas and new import infrastructure. However, the long-term sustainability of this trend is uncertain due to the EU's decarbonisation goals, potential over-contraction, and the flexibility of FSRUs. Emerging technologies such as small-scale LNG and FSRUs play a crucial role in enhancing the EU's LNG infrastructure and supply flexibility, contributing to the EU's goal of securing a stable and diverse gas supply.