The European Union has reduced its dependence on Russian energy this year by banning coal imports and preparing an oil embargo. But one product is on the rise and unlikely to face an EU boycott anytime soon, Bloomberg reported.
Imports of liquefied natural gas from Russia are up about 40 percent year over year as buyers try to replace dwindling pipeline gas flows. It's a bitter pill to swallow for many EU countries that have imposed tough sanctions on Russia. The EU spent a record 12.5 billion euros on Russian LNG from January to September, five times more than a year earlier.
Growing demand from countries such as France and Belgium helped make Russia the No. 2 LNG supplier to Northwest Europe this year, well behind the U.S. but ahead of Qatar, ship and port tracking data show.
“Russian LNG has to continue to flow,” said Anne-Sophie Corbeau, a researcher at Columbia University's Center on Global Energy Policy. “We need that on the global LNG balance: it is already tight enough as it is. I think most European countries are indeed happy to turn a blind eye on this.”
Among European countries, only Britain and the Baltic states have stopped buying Russian LNG. Buyers throughout the region are avoiding buying Russian oil, and the EU ban is due to take effect Dec. 5.
A full embargo on Russian gas has never been seriously considered, given the shortage of global supplies and the possibility of an even tighter market next year. Nevertheless, the EU has made efforts to find alternative sources. In March, the bloc pledged to replace nearly two-thirds of its gas imports from Russia this year, with most of the new volumes coming from global LNG.
Russian gas now accounts for less than 10 percent of the region's fuel supply, up from more than one-third last year, but LNG's share of Russian supplies is close to half.
Supply across Europe is far from even, as ship tracking data shows. As Britain rejects Russian LNG, cargoes have found a home elsewhere: the country's shipments to Belgian ports more than doubled between January and October, and French imports rose 60 percent.
Most of the world's LNG shipments are under long-term contracts, with sellers often being large multinational corporations, generally outside the control of the government.
For example, France's TotalEnergies SE owns 20% of Yamal LNG, the largest production facility in Russia. Although the company has suspended new investments in Russia and sold some assets in the country, it has pledged to stay in Yamal to help ensure gas supplies to Europe - as long as sanctions allow. Total also owns 19% of Russia's PJSC Novatek, which controls the project.
The state energy giant PJSC Gazprom, the main supplier of pipeline gas to Europe, has also begun supplying LNG to the region. While its massive Sakhalin 2 project in Russia's Far East usually delivers to Asia, a new, smaller facility on Russia's Baltic Sea coast has sent its first shipments to Greece.
For the moment, Europe has no choice but to keep buying Russian liquefied gas. With consumers suffering the worst cost-of-living crisis in decades and high fuel prices causing inflation, energy security is a top priority for governments throughout the region.
The gas market is likely to remain tight until new LNG supplies are available at the earliest in 2025, said consultant Kate Dourian, a freelance researcher at the Arab Gulf Institute in Washington.