Research Briefing | Dec 8, 2022

Why European gas supply will tighten next year

Following the loss of Russian pipeline gas, European countries have increasingly focused on LNG shipments as a replacement, giving Europe a safety buffer this winter. Combined with reduced consumption, this should see Europe through the winter season. But the outlook for the following winter is far more uncertain, with Russian flows essentially stopped and alternative LNG flows not yet fully replacing them.

What you will learn:

  • Global LNG capacity is currently not sufficient to replace Russian gas to Europe entirely. LNG construction schedules show that new capacity is not set to come online in significant quantity to fully replace Russian gas until 2025.
  • The toughest period will undoubtedly be next year’s winter, when we project total gas supply for the EU and UK to drop to 405bcm. European countries will need to sustain a 15% consumption cut through 2023 to not completely deplete gas reserves, with this most heavily concentrated in the industrial sector.
  • The US is leading the expansion in LNG exports with two new terminals having secured financing since the start of Russia’s war on Ukraine. The US has 44bcm of financially secured new capacity coming online by 2025, with a further 50bcm planned but not yet financially secured.
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