Liquefied natural gas comes to Europe's rescue. But for how long?

Yet even as the imports have advanced the European Union’s goal of slashing its dependence on Russian energy, the growing reliance on the fuel also comes with potentially negative implications, including uncertainty for its future and concerns about its effect on climate.

“Countries will need to source some gas if they are not getting supplies from Russia,” said Doug Parr, chief scientist and policy director at Greenpeace UK. “The climate risk is that there is a lock into new gas infrastructure which proves quite hard to retire,” he added.

European imports of LNG rose by more than 50% compared with the period a year earlier in the first five months of 2022, according to Bernstein, a Wall Street research firm. Britain saw a surge of LNG imports in the winter months, with January the highest on record.

The increases in liquefied gas have helped Europe compensate for shortfalls in gas from Russia. Increased imports of LNG are the most important facet of the European Union’s strategy for reducing dependence on Russian gas.

While Russia has long supplied a wide range of energy commodities to Europe, Moscow’s chokehold on supplies of gas, used for heating, cooking, generating electric power and industry, has grown particularly strong, supplying about a third of Europe’s consumption in recent years.

“We simply cannot rely on a supplier who explicitly threatens us,” Ursula von der Leyen, president of the European Commission, said earlier this year as she outlined a proposal to make Europe independent of Russian energy.

Unlike most natural gas, which comes through pipelines, LNG can be shipped from anywhere that has invested in the facilities needed to chill it to a liquid, a multibillion-dollar investment, so it can go to places like the Isle of Grain with its mazes of equipment to turn it back into a vapor.

“The key is the flexibility,” said Paul Sullivan, head of systems capability and risk at National Grid, the utility that owns the LNG terminal.

LNG is an energy source that can make a difference in a hurry. Chilling natural gas to minus 260 degrees Fahrenheit (minus 162 Celsius) reduces its volume to one six-hundredth of its volume as a gas. A large tanker can carry enough fuel to light up to 70,000 homes for a year, according to an industry estimate.

But even as Europe embraces LNG with disclaimers from leaders like von der Leyen about eventually weaning itself off gas, climate activists worry that it could be investing many billions of euros in an expensive new program based on fossil fuels — one that, as Parr said, is then difficult to retire.

That is already happening. European countries are scrambling to build facilities to receive LNG. After Russia’s invasion of Ukraine, Germany has found itself in the dangerous predicament of being the largest buyer of Russian gas and yet having no LNG-receiving terminals in case Moscow cuts off the fuel, as it is signaling it may do.

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Berlin now plans to build as many as four receiving units. Finland, Estonia, Italy and the Netherlands are all considering building terminals or expanding existing ones. Some of these units are likely to be floating installations that can be towed elsewhere when their leases end.

The liquefied gas is coming at a steep price. In most years, the major markets for LNG are Asian countries like Japan, South Korea and China. During the first five months of 2022, Asian imports fell by 8%, in part because of slowing demand from China caused by COVID lockdowns.

What’s helping to shift gas away from Asia toward Europe is not so much promises from politicians like Biden but astronomical prices — currently around nine times those of two years ago.

“European prices have to rise to attract cargoes from Asia into Europe to fill the hole that has been created by Russia,” said Neil Beveridge, an analyst at Bernstein. “That requires some really high prices to do that.”

Futures prices have been around $40 per million British thermal units, an industry measure. In energy terms that is comparable to more than $200 a barrel for oil, roughly double the current price for Brent crude, the international bench mark.

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Quick or easy solutions to Europe’s energy problems don’t seem to be available. There is just not enough LNG around or likely to come online in the next few years to replace all of Russia’s exports to Europe.

While the high prices of today are likely to lead to more LNG facilities’ being built, especially in the United States, at least five years is required to build new export facilities so filling any hole left by Russia will take time.

Investors will also be uncertain about whether to go ahead. Europe’s intentions are hard to fathom. Von der Leyen recently visited Egypt and Israel, which have large gas fields, in an effort to drum up new supplies. The agreement reached to expedite gas supplies for Europe was also tempered by language warning that gas consumption in the European Union was expected to begin to decline by 2030, perhaps too soon to give assurance to investors contemplating putting billions of dollars into LNG facilities.

“It’s very mixed signals from the EU,” said Massimo Di Odoardo, vice president for gas research at Wood Mackenzie, a consulting firm.