Two of the biggest challenges that Europe faces in the race to wean itself off Russian natural gas are the need to develop new pipeline connections between the continent’s many isolated gas networks and to integrate the European Union’s multiple gas markets. Addressing these won’t be easy. Unlike the U.S., whose pipeline systems were designed to transport gas long distances and across jurisdictional lines, Europe’s networks are more regional or even local in nature, and only recently has the EU been taking steps to link the continent’s markets. Oh, by the way, U.S. producers and LNG exporters should care about all this, because if Europe gets its act together, it could become an even larger and longer-term recipient of gas originating from the Permian, Haynesville, Marcellus/Utica and other shale plays. In today’s RBN blog, we discuss the prospects for tying together the EU’s gas pipelines, gas storage facilities, LNG import terminals and gas markets.
As we said in Part 1 of this series, the Russian war against Ukraine has focused Europe on the issue of energy security, especially as it relates to natural gas. The continent has previously relied on Russia for more than 40% of its gas, but it now must scramble for new suppliers and alternative forms of energy. In addition to the struggles famously faced by countries like Germany, the matter is particularly urgent in a few countries along or very near the Russian border, including Lithuania, Poland and Ukraine itself. Almost two years ago the three countries formed the “Lublin Triangle,” an alliance of sorts with the aim of enhancing military, cultural and economic cooperation while also supporting Ukraine’s prospective integration into the EU and NATO.
The central issue at hand is what infrastructure and market changes will be needed to enable European countries to replace Russian supplies. At the macro level, enhanced LNG import infrastructure, regasification facilities, pipelines, etc., can create access for the supply of LNG from the U.S., Qatar and elsewhere. But, as we explained in Everything Has Changed, Europe faces significant challenges in attracting and accommodating new supplies of LNG, including the need to expand pipeline systems.
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