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Q&A | Europe’s Dependence on Russian Gas
Q&A by Anne-Sophie Corbeau • March 10, 2022
Russia’s invasion of Ukraine has created an energy crisis of unprecedented levels, as reflected in the rapid increase in commodity prices. European countries and the United States have responded by sanctioning Russia, and Germany has halted certification of the Nord Stream 2 natural gas pipeline. Concerns about the extent of Europe’s energy reliance on Russia, particularly for natural gas but also for coal and oil, are rising as the conflict worsens.
In this piece, Anne-Sophie Corbeau, a global research scholar with the Center on Global Energy Policy, answers questions about how deep Europe’s dependence on Russia is and how this adverse relationship developed.
How dependent is Europe on Russian gas?
In 2020, Europe,[1] including Turkey, imported about 185 billion cubic meters (bcm) of Russian gas: 168 bcm of pipeline gas and 17 bcm of liquefied natural gas (LNG).[2] This equates to about 36 percent of Europe’s total gas demand of 512 bcm. In 2021, by my estimates, Europe imported the same amount and in the same pipeline/LNG proportion, now approximately 34 percent of the higher 540 bcm of demand.[3][4]
Meanwhile, the European Union imported 155 bcm of Russian gas in 2021, consisting in 142 bcm of pipeline gas and 14 bcm of LNG.[5] The EU depends on Russian gas for 45 percent of its imports and around 40 percent of its consumption.[6]
To put these numbers in perspective:
- Russia is by far Europe’s largest supplier. The second largest source of external gas supply in 2021 was LNG from various nations (excluding Russia), at 90 bcm. Other pipeline suppliers such as Algeria, Azerbaijan, Iran, and Libya contributed about 60 bcm. Europe’s domestic gas production is about 190 bcm.
- Russia’s pipeline gas exports to Europe are equivalent to about a third of global LNG trade as of 2021. If Europe were to replace all Russian pipeline gas with LNG, it would need to import about 275 bcm (based on Europe’s balance in 2021): this represents more than 53 percent of the global LNG trade. Europe would also need to find alternative LNG sources to replace Russian LNG.
- Russian pipeline gas exports are in the same range as the current gas use in Europe’s power sector. If Europe wanted to replace the equivalent of Russian gas imports with renewables, it would need to build an additional 370 gigawatts (GW) of wind to replace this gas (on top of 215 GW installed as of 2020). Europe has installed on average 14 GW of wind capacity per year between 2015 and 2020. Alternatively, Europe would need to add another 105 GW of nuclear capacity, close to the existing capacity installed in 2021 (115 GW).
How did Europe become so dependent on Russian gas?
Reducing Europe’s dependence on Russian gas has been widely discussed for the past 15 years in Brussels. Despite alarm bells from a January 2009 crisis that led to the disruption of Russian gas transiting through Ukraine for two weeks and Russia’s annexation of Crimea in 2014, Europe has not stemmed natural gas imports from Russia. In contrast, Russian pipeline gas deliveries to Europe increased post-2014, and Europe also started importing Russian LNG from the Yamal LNG project, which started in 2017.
There are essentially three reasons for this persistent dependence on Russian gas:
- Europe’s natural gas production started to decline rapidly after 2010. In the 2000s, European gas production represented between 50 and 60 percent of Europe’s demand. The largest producers were the Netherlands, Norway, and the United Kingdom. But over the past 10 to 15 years, UK natural gas production has started to decline and earthquakes related to gas production in the Netherlands have accelerated the decline of the Groningen field’s gas output, once the largest gas field in Europe.
- Europe’s gas demand has stabilized over the past five years (though it remains below its peak in 2010, which was largely driven by exceptionally cold weather).
- Alternative supplies fail to close the growing import gap. Due to Europe’s declining production, its net imports have increased by over 80 bcm since 2016. While Europe was successful at expanding its LNG regasification capacity to around 250 bcm per year as of 2020 (a 40 percent increase from 2010), the increase in LNG imports has not quite covered the increased import requirement. Additionally, Europe acts as a balancing market for global LNG supply: it can absorb excess LNG supply when the market is oversupplied or redirect LNG cargoes when the market is tight. Europe is also in competition with Asia to purchase LNG. Imports from North Africa (Algeria, Libya) have dwindled, and deliveries from Azerbaijan remain modest, at an estimated 15 bcm in 2021 (equivalent to 8 percent of Russian gas supplies to Europe).
Figure 2: Europe’s gas demand, production, and imports
Sources: bp, and author’s estimates for 2021 based on IEA and Bloomberg.
Note: Demand and production plus imports do not match due to storage and exports from Europe.
Notes
[1] The definition of Europe includes EU27, Bosnia-Herzegovina, Georgia, Gibraltar, Montenegro, North Macedonia, Serbia, Switzerland, Turkey, and the United Kingdom.
[2] bp, Statistical Review of World Energy, July 2021, https://www.bp.com/en/global/corporate/energy-economics/statistical-review-of-world-energy.html.
[3] International Energy Agency, Gas Market Report – Q1-2022, January 31, 2022, https://www.iea.org/reports/gas-market-report-q1-2022.
[4] Gazprom’s data point to similar pipeline gas exports to Europe in 2020 (174.9 bcm), see Gazpromexport, Delivery statistics; and in 2021 (total pipeline exports of 185.1 bcm), see O. Tanas and D. Khrennikova, “Gazprom misses 2021 gas export targets straining European gas markets,” World Oil, January 3, 2022, https://www.worldoil.com/news/2022/1/3/gazprom-misses-2021-gas-export-targets-straining-european-markets.
[5] European Commission, “REPowerEU: Joint European action for more affordable, secure and sustainable energy,” March 8, 2022, https://ec.europa.eu/commission/presscorner/detail/en/IP_22_1511.
[6] Ibid.
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