Natural Gas in the EU in the Twenty-First Century: A Special Emphasis on LNG

Abstract

This chapter reviews the development of natural gas—in particular, LNG—in the energy consumption of the European Union since the turn of the millennium. Although the EU’s natural gas consumption has decreased by three percent in 2020 due to the economic decline caused by the corona pandemic, the natural gas share in the EU’s energy consumption continues to grow as the EU implements its carbon–neutral energy policy and Germany is set to shut down its last nuclear power plants by the end of 2022. The increased consumption, combined with the decrease in the EU’s gas production, will further increase the EU’s gas import dependence. In 2020, over 85% of gas consumed in the EU was imported from outside the Union. Russia is the EU’s largest gas supplier. In 2020, its share was 48% of the EU’s total gas imports, including LNG. Russia’s share of the EU’s gas imports will grow in the coming years, as the gas production of the Netherlands—currently the largest gas producer in the EU—plummets in 2022 when the Netherlands has to close the Union’s largest gas field in Groningen. Gas production by Norway, the EU’s second most important external gas supplier, will decrease more rapidly over the next decade. Fortunately, the EU’s gas supply now has a third main pillar—LNG, which in 2020 already contributed a quarter of gas imports into the EU. The LNG share could be even larger, as the Union used half of the nameplate capacity of its LNG ports, and only half of EU member states imported LNG. Since LNG already has a strategic role in the EU’s primary energy consumption, the European Commission should in its plans on security of supply pay more attention to bottlenecks in LNG ports and the ownership of LNG tankers, in addition to the geographical diversification of gas supplies. The LNG boom, which has lasted two decades, has slowed down the EU’s dependence on Russian gas supplies, but the boom is now showing signs of deceleration. The spread of LNG is hindered by factors such as the new gas pipelines from Russia to Europe (Nord Stream 2 and TurkStream). While waiting for the completion of Nord Stream 2, Germany—the world’s second largest gas importer—has not constructed a single LNG receiving port on its soil. Although it is possible that Germany could build one or two large-scale LNG terminals, it is evident that the pipelines will continue to dominate the gas supply of the EU’s largest gas consumer. In addition to the pipelines, the Green Deal and the associated hydrogen revolution will also increase uncertainty among member states with an interest in LNG. This is because the LNG boom may gradually be replaced by a hydrogen boom.