But an analysis of the world’s top 10 producers shows how difficult it would be to remove Russian gas from the European energy mix without imposing severe restrictions on industrial consumption that could stifle economic growth. The EU imports about 30 percent of its oil and 40 percent of its gas from Russia, paying Moscow about $ 850 million a day at current prices to keep hydrocarbons flowing. Weaning Europe from Russian oil would be a challenge. Getting rid of Russian gas would be more difficult. Gazprom, Russia’s largest gas producer and monopoly exporter, dominates the global gas market. It produced 540 billion cubic meters last year, more than BP, Shell, Chevron, ExxonMobil and Saudi Aramco combined, according to data from consulting firm Wood Mackenzie. Of these, 331 billion cubic meters were consumed in Russia and 168 billion cubic meters were channeled to Europe.

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Giles Farrer, head of gas research at Wood Mackenzie, said replacing that volume would be “impossible” as production at most gas projects around the world was already close to peak levels. “There is nothing else out there.” In contrast to the oil industry, where large producers, such as Saudi Arabia, have historically held additional capacity to help balance the market in the event of a global supply disruption, the gas industry tends to operate at or near capacity. Gas is also less interchangeable than oil, as transporting it from the point of production to the point of consumption requires a pipeline or liquefaction plant and therefore a larger initial investment, Farrer said. As a result, countries with significant gas reserves, such as Russia, tend to develop large domestic markets before building export capacity. Iran’s national oil company, the largest gas producer after Gazprom, produced 291 billion cubic meters in 2021. But 280 billion of that was consumed in Iran, according to Wood Mackenzie. The easing of sanctions on Iran in the event of a nuclear deal could reopen wider international access to Iranian gas, but would require new export facilities, which would take years to build. A man fills a gas cylinder at a gas station in Stefan Voda, Moldova. EU imports about 40% of its gas from Russia © Dumitru Doru / EPA-EFE Apart from Russia, the only suppliers of gas in Europe are Norway, Azerbaijan, Libya and Algeria, where the state-owned Sonatrach shipped 34 billion cubic meters via pipelines to Spain and Italy last year. Algeria could increase that supply if it can resolve a diplomatic dispute with Morocco, which has blocked one of its routes to Spain since November, but must first boost production and meet growing domestic demand. according to James Waddell, Head of European Gas Advice on Energy Aspects. “If they can produce gas and if it is not consumed domestically in Algeria, there is a surplus export capacity,” he said. “The problem is quickly bringing upstream to Algeria.” The Oxford Institute for Energy Studies estimates that Norway could increase exports by up to 5 billion cubic meters and Azerbaijan by up to 3 billion cubic meters. The lack of alternative gas sources sufficient to offset the decline in Russian flows leaves Europe with little choice but to dramatically boost liquefied natural gas imports.

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LNG – natural gas that is supercooled and condensed – can be transported by ship and therefore does not need a pipeline. Replacing all Russian gas in Europe would require 112 million tonnes of LNG a year, which is equivalent to almost a third of the current global LNG market, according to Bernstein Research. While Europe wants to reduce its gas consumption by investing in renewable energy and energy efficiency, so it is unlikely that it will need to replace all current flows from Russia, much more LNG will be required with the majority expected to come from USA. “The hope is the US LNG,” Waddell said. The third largest exporter of LNG in the world after Australia and Qatar, the US has already stated that it will help the EU to secure an additional 15 billion cubic meters of LNG in 2022 and more in the future, without specifying how many will come from the US and how many from other countries.

In response to growing European demand, Bernstein expects US producers to approve new projects that could more than double US LNG export capacity from 71 million tonnes (about 105 billion cubic meters) in 2021 to more than 200 million. tons per year by 2030. This would make the US by far the largest exporter of LNG. Prior to that, the next major gas project scheduled to be completed is the expansion of QatarEnergy’s Northern Field, the first phase of which will begin production in 2025, boosting the Gulf’s LNG export capacity to approximately 100 million tonnes. annually until the end of 2026. State-owned QatarEnergy produced 110 billion cubic meters of gas last year, of which 24 billion were consumed in Qatar and 86 billion were converted to LNG for export. Among the seven oversized Western companies, Shell, the UK-listed company, was the largest producer of natural gas last year, pumping 103 billion cubic meters of gas from around the world, 44 billion of which were converted to LNG, according to Wood Mackenzie. LNG is central to Shell’s strategy. Record prices helped the company’s integrated gas division generate 63 percent of the group’s $ 6.4 billion profit in the fourth quarter of 2021. However, any investment in new production – which is what would be required by industry to offset the lost Russian supply – is difficult for listed energy companies to approve when it may take at least 15 years to repay, Wood Farrer said. Mackenzie. “International oil companies have accelerated all their ambitions for the energy transition, so an LNG investment must meet these criteria,” he added. “He has to pay off relatively quickly.”

In contrast to the oil market, where analysts expect some countries to continue to buy Russian crude, resulting in a partial redirection of trade to help reduce the supply crisis in Europe, Russian gas flows cannot be redirected by the same way. Gazprom piped about 10 billion cubic meters to China in 2021 via the Power of Siberia pipeline, according to Wood Mackenzie. Moscow and Beijing have signed agreements to increase this flow, but the gas fields in eastern Russia, which supply China, are not linked to the western fields, which supply Europe. Whether or not formal sanctions are imposed on gas exports, Energy Aspects expects Russian supplies to Europe to fall by at least 21 billion cubic meters this year unless long-term contracts expire in 2022. The lack of alternative sources of supply means that Europe will need to reduce consumption, either by households or industry, to balance supply and demand, Waddell said. “What is technically feasible and most delicious is to be removed from the industry,” he added. “This means huge GDP cuts, job losses, instead of allowing people to freeze in the winter.”

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