Turn The Page - EU Efforts to Move Away from Russian Gas Add Uncertainty to Global LNG Market

The European Union (EU) has taken a number of steps in recent years to end its reliance on Russian natural gas, which accounted for nearly half of the bloc’s supplies before the 2022 invasion of Ukraine. But while the changes happening in Europe might provide a boost for global LNG exporters, including projects in operation or under development in the U.S., the EU’s policy shifts have also introduced greater uncertainty around demand. In today’s RBN blog, we look at the increasing difficulty in predicting EU gas demand and what it means for U.S. exporters and the rest of the global LNG market. 

In our first piece examining the future of the European gas market and its demand for LNG we looked at the EU’s objective to end all imports of Russian gas and LNG by the end of 2027, according to the 17^th set of sanctions issued by the EU Commission on May 6. Today our focus shifts to the future of natural gas (and hence LNG) demand in the EU. Starting with recent history, EU gas demand stood at 322 Bcm (31.2 Bcf/d) in 2024, close to 2023 levels. Although industrial gas demand (top line in Figure 1 below) improved in 2024 from the price-induced downturn in demand of 2022-23, gas for power generation (bottom line) continued to fall due to the increased dispatch of renewable power sources and overall gas demand remained 20% below the 2017-21 average.

Figure 1. EU Gas Consumption By Sector, 2017-24. Source: ACER

Note: Percentage changes are from 2017-21 averages

From an LNG perspective, European demand declined by 22 Bcm (2.13 Bcf/d) in 2024, partly due to the mild winter of 2023-24, which reduced the amount of LNG required to refill storage to the EU-mandated 90% fill level by November 2024. The lesson here, and expanded on below, is that predicting gas and LNG demand in a European context is subject to many variables and considerable uncertainty.

Historically, modelling of gas demand was a simple function primarily of ambient air temperature and economic growth. However, that is changing as the EU Commission has adopted plans and policies to reduce gas demand from its current level via a range of new objectives, which are likely to make projecting gas demand even more challenging to quantify.