Italy and Europe have significantly reduced the gas that comes from Russiabut not LNG, the liquefied natural gas: imports through gas pipelines have in fact collapsed compared to last year, unlike LNG which, on the other hand, has even increased and allows Moscow to remain linked to the energy destiny of the Continent. Despite the sanctions, Russia thus continues to support its earnings through the export of energy products, at the same time increasing the risks for the security of future Italian and European supplies. Now LNG is an important resource for responding to Russian shortages, but we know that there could soon be problems in the liquefied natural gas market as well: in 2023 we could again depend on Russian supplies.
The role of LNG
LNG is playing a primary role in replacing the volumes of gas that no longer arrive from Russia. Italy and Europe have bet heavily on liquefied natural gas in the new supply diversification strategy: in 2021 Italy and the European Union depended for over 40 percent on Russian gas.
Since the beginning of the war in Ukraine, this percentage has collapsed: we have gone from over 40 percent dependency in 2021 to 0.6 percent in October 2022. In absolute values we are talking about billions of cubic meters of gas less.
In addition to having increased supplies from other countries, LNG has contributed to replacing Russian volumes, increasingly affecting the total amount of gas imported. The problem is that Russia continues to be present in gas supplies to Italy and Europe, precisely through LNG.
LNG links Europe and Russia again
In 2022, imports to Europe from Russian pipelines decreased by more than 80 percent, but, at the same time, the presence of Russian LNG increased by 50 percent. We have seen how important liquefied natural gas is for the new gas supply structure, precisely to replace Russian gas. Italy and the other countries of the European Union have increased their imports of LNG mainly from the United States and Qatar, but also from Russia, the world’s fourth largest exporter of LNG.
The speech concerns not only the origin, but also the cost. In fact, Russia continues to earn from the countries that have imposed economic sanctions on it, especially the European ones. The gas that Russia exported via pipelines was sold at extremely competitive prices, but the increase in demand has allowed LNG to be sold at even higher prices. Thus Russia has known a record of LNG exports to Europe. In September 2022 alone, EU countries bought nearly $1 billion worth of LNG from Russia.
In detail, Spain imported more from Russia in 2022 than any other year, Belgium is on track to surpass its annual record, while France increased its LNG purchases by 6 percent. Italy, together with Portugal, has also occasionally imported LNG from Russia.
Will the gas from the new regasification plants be enough?
But how does Russian LNG arrive in Europe? Most of the LNG arrives in Europe from Russia thanks to Novatek, a Russian company which on paper is not owned by the Kremlin and which has therefore been able to avoid sanctions. Novatek operates the Yamal LNG terminal in northwestern Siberia, in which French energy giant TotalEnergies is a minority shareholder.
Thus Russia avoids sanctions thanks to the Sicilian refinery of Priolo
In addition, some European countries have agreements to import Liquefied Natural Gas from Russia for several years to come. Only two countries in Europe, the UK and Lithuania, have completely stopped importing Russian LNG.
The problems of LNG: the “black” year
Several analysts consider 2023 to be the black year for LNG, and the link with Russia also for this type of supply makes things worse. Once again, the problem is availability on the market compared to demand: the lower Chinese imports of liquefied natural gas in the first ten months of 2022 have increased its availability for the European market, which needs to replace the lost volumes from Russia, but how is hypothesized in two analyzes made by Standard&Poor’s and the International Energy Agency (IEA), if Chinese LNG imports resume next year at the pace of 2021 it would miss more than 85 percent of the global liquefied natural gas supply that would have been more expected. And global supply is expected to increase by only 20 billion cubic meters next year.
In the event of a zeroing of Russian gas supplies and a recovery of Chinese LNG imports to 2021 levels, the IEA shows that Europe could end up with about 30 billion cubic meters of gas less. A problem for this winter, but above all for the next one, when the stocks will have to be refilled. As seen with natural gas, LNG too could expose Europe to Russian blackmail, among other things, with further price increases: dependence on fossil fuels would thus turn into dependence on Russia once again.