Receive free EU energy updates
We’ll send you a myFT Daily Digest email every morning with the latest EU energy news.
The EU is expected to import record amounts of liquefied natural gas from Russia this year, despite aiming for the union to wean itself off Russian fossil fuels by 2027.
In the first seven months of this year, Belgium and Spain were the second and third largest buyers of Russian LNG after China, according to an analysis of industry data by Global Witness, an NGO.
Overall, EU imports of the supercooled gas rose 40 percent between January and July this year compared to the same period in 2021, before Russia’s all-out invasion of Ukraine.
The increase is from a low level as the EU did not import significant amounts of LNG prior to the war in Ukraine as it relied on gas pipelines from Russia.
However, the increase is much stronger than the world average increase in imports of Russian LNG, which was 6 percent over the same period, Global Witness said.
The NGO’s analysis is based on data from industry analysis firm Kpler, which showed the EU is importing about 1.7 percent more Russian LNG than when imports hit a record high last year.
According to Global Witness, the cost of LNG imported at spot market prices from January to July was €5.29 billion.
“It’s shocking that countries in the EU have worked so hard to break away from the Russian fossil gas pipeline, only to then replace it with the shipped equivalent,” said Jonathan Noronha-Gant, senior fossil fuel activist at Global Witness. “It doesn’t matter if it comes from a pipeline or a boat – it still means European companies are sending billions there [Vladimir] Putin’s war chest.”
You see a snapshot of an interactive graphic. This is most likely because you are offline or JavaScript is disabled in your browser.
Most of the Russian volumes come from the Yamal LNG joint venture, which is majority-owned by the Russian company Novatek. Other shares are held by the French TotalEnergies, the Chinese CNPC and a Chinese sovereign wealth fund. The company is exempt from export duties but subject to income tax.
Not only does this result in billions of euros in revenue flowing into Russia as the EU tightens sanctions against Moscow, it also exposes the EU to the risk of a sudden decision by the Kremlin to curb supplies, as it did with the pipelines the case was gasoline last year.
Alex Froley, senior LNG analyst at consultancy ICIS, said: “Long-term buyers in Europe say they will continue to take contracted volumes unless prohibited by politics.” disruption to shipping as global trade patterns would need to be rearranged, “but eventually Europe could find other suppliers and Russia other buyers.”
Belgium imports large quantities of Russian LNG, as its Zeebrugge port is one of the few European transhipment points for LNG from ice-class tankers operating in the far north to regular cargo ships.
Recommended
Spanish utility Naturgy and French utility Total also have ongoing contracts for large volumes of Russian LNG, analysts said.
EU politicians have urged European companies not to buy Russian LNG.
Spanish Energy Minister Teresa Ribera, whose government is chairing the EU’s six-month presidency, said in March that LNG should be sanctioned, adding the situation was “absurd”.
Kadri Simson, the EU’s energy commissioner, said the bloc “can and should go completely off Russian gas as soon as possible, without compromising our security of supply”.
EU officials have signaled sweeping efforts to phase out Russian fossil fuels by 2027 but warned that a total ban on LNG imports could trigger an energy crisis like last year’s when gas prices in the EU hit record highs of over €300 a year reached megawatt hours.
An official said that although Europe’s gas storage facilities are more than 90 per cent full ahead of the winter, there is still “great nervousness” should further supply cuts occur.
According to Kpler data, Russian LNG accounted for 21.6 million, or 16 percent, of the EU’s total 133.5 million cubic meters of LNG imports (equivalent to 82 billion cubic meters of natural gas) between January and July, making it the Union’s second largest supplier liquid fuel to the USA.
You see a snapshot of an interactive graphic. This is most likely because you are offline or JavaScript is disabled in your browser.
In March, energy ministers introduced a clause in the Union’s new gas market rules that would allow governments to ban Russian and Belarusian companies from booking capacity on EU LNG infrastructure, to provide a legal way to prevent find imports.
But the proposal must first be negotiated with the European Parliament before it can come into force.
Henning Gloystein, director of energy, climate and resources at Eurasia Group, said the likelihood that governments would have to order industry shutdowns due to gas shortages this winter is “near zero”.
The EU must cut demand by another 10 percent, Gloystein added. “If we don’t structurally reduce gas consumption by 10 to 15 percent, there is a risk that this race will repeat itself [for supplies] each year.”
Source : www.ft.com