The Economist: "Replacing Russian gas with LNG is almost impossible"

The Kremlin's special operation in Ukraine, according to the Economist magazine, has given a new impetus to disputes about the future of European energy, in particular, about the supply of natural gas. With its help, Europe receives about a quarter of its energy. In 2019, for example, Russia accounted for more than 40% of these deliveries.

By the way, the West has not yet completely banned the export of Russian hydrocarbons, but Germany has suspended the license of the completed but not launched Nord Stream 2 gas pipeline. But what if President Vladimir Putin cuts off gas to the West?

Among the alternative energy sources, liquefied natural gas should be mentioned, which, as a rule, is transported by tankers across the seas and oceans. The question arises: to what extent can liquefied gas from overseas be able to replace Russian pipeline gas as a source of energy?

Europe is already using LNG with might and main - it accounts for about a quarter of imports. Liquefied gas is first converted into a liquid for transportation, after which it undergoes the so-called "regasification" at terminals, usually near the coast, and only then it is supplied for heating and powering homes.

Thanks to large investments in regasification plants, Europe has a lot of idle capacity. The continent's import terminals were only 45% full last year, according to industry publication Energy Intelligence, although not all of them are in the right place.

Germany has no terminals at all, and Spain accounts for a quarter of the capacity of the entire continent, although its gas infrastructure is largely isolated from the rest of Europe.

A much more pressing issue is the affordable supply of liquefied natural gas. The largest LNG exporters are America, Australia and Qatar. Although they have plenty of gas, all of them are already exporting at full capacity. It will take a long time to expand the capacity to liquefy and export gas, so Europe's best hope in the short term is to intercept existing LNG supplies originally destined for other countries.

But Asia needs LNG itself and a lot. For example, Chinese imports grew by 82% from 2017 to 2020, and last year Beijing overtook Tokyo to become the world's largest importer. In addition, about 70% of the world's LNG is traded under contracts for ten or more years. Europe, on the other hand, relies on spot markets and short-term contracts. In the past, this has enabled the EU to take advantage of low prices and abundant supply.

In addition, it is a kind of guarantee that countries will not be tied to fossil fuels for decades to come. On the other hand, Europe itself was at the mercy of the market.

As Europe's gas supplies dwindled over the fall and winter - partly because supplies from Russia dwindled - imports of liquefied natural gas soared. As, however, and the prices. In the past, spot prices in Asia have generally been higher than in Europe. But in recent months, European prices have caught up with Asian ones.

The situation in Ukraine only exacerbated the situation. The price of LNG in northwestern Europe rose 29% overnight after Putin announced his special military operation on February 24.

European politicians are trying to secure new supplies of liquefied gas. Since America cannot give much more, President Joe Biden has promised to help the continent find other sources. But so far, his efforts have been unsuccessful.

The other day, Qatar's energy minister said it was "nearly impossible" to supply enough LNG quickly to replace Russian gas.

True, liquefied gas is not Europe's only leverage to make up for "dropped" Russian supplies, but it is important, although it is difficult to use it, the Economist magazine believes.