How dependent is Europe on Russian oil?

How dependent is Europe on Russian oil?

The Russian invasion of Ukraine has created an unprecedented energy crisis, which is reflected in the rapid rise in commodity prices. European countries and the U.S. responded with sanctions against Russia, with Germany halting the certification of the Nord Stream 2 gas pipeline. As the conflict worsens, there are growing concerns about Europe’s dependence on Russia for energy, especially natural gas as well as coal and oil.

In this article, Anne-Sophie Corbeau, a global studies scholar at the Center for Global Energy Policy, answers questions about how dependent Europe is on Russia and how this adverse relationship has developed.

How dependent is Europe on Russian gas?

In 2020, Europe, including Turkey, imported about 185 billion cubic meters (bcm) Russian gas: 168 bcm pipeline gas and 17 bcm liquefied natural gas (LNG). This corresponds to about 36% of Europe’s total gas demand of 512 bcm. By my estimate, Europe will import the same amount and the same pipeline/LNG ratio by 2021, which now accounts for about 34% of the 540 bcm demand.

At the same time, EU imports 155 cm Russian gas production in 2021, including 142 bcm of pipeline gas and 14 bcm of LNG. The EU relies on Russian gas for 45% of its imports and about 40% of its consumption.

To put these numbers in perspective:

• Russia is by far the largest supplier in Europe. The second largest source of external gas supply in 2021 is LNG from various countries (excluding Russia) at 90 bcm. Other pipeline suppliers such as Algeria, Azerbaijan, Iran and Libya contributed about 60 bcm. Domestic gas production in Europe is around 190 bcm.
• As of 2021, Russia’s pipeline gas exports to Europe are equivalent to about a third of global LNG trade. If Europe were to replace all Russian pipeline gas with LNG, it would need to import around 275 bcm (based on Europe’s 2021 balance): this represents over 53% of global LNG trade. Europe also needs to find alternative LNG sources to replace Russian LNG.
• Russian pipeline gas exports are in the same range as current gas use in the European power sector. If Europe wants to replace the gas equivalent of Russia’s imports with renewable energy, it will need to build an additional 370 gigawatts (GW) of wind energy to replace this gas (on top of the 215 GW installed in 2020). From 2015 to 2020, Europe installed an average of 14 GW of wind power capacity per year. Alternatively, Europe needs to add another 105 GW of nuclear power capacity, close to the existing capacity (115 GW) installed in 2021.

How did Europe become so dependent on Russian gas?

Reducing Europe’s reliance on Russian gas has been widely discussed in Brussels for the past 15 years. Although the crisis of January 2009 sounded alarm bells that disrupted the transport of Russian gas through Ukraine for two weeks and Russia annexed Crimea in 2014, Europe has not blocked gas imports from Russia. In contrast, Russia’s pipeline gas supply to Europe increased after 2014, and Europe also began to import Russian LNG from the Yamal LNG project that began in 2017.

There are basically three reasons for this continued reliance on Russian gas:

• Natural gas production in Europe began to decline rapidly after 2010. In the 2000s, European gas production accounted for 50 to 60 percent of European demand. The largest producers are the Netherlands, Norway and the United Kingdom. But over the past 10 to 15 years, gas production in the UK has begun to decline, and earthquakes related to gas production in the Netherlands have accelerated the decline in gas production from the Groningen field, once Europe’s largest.
• Gas demand in Europe has stabilized over the past five years (Although it’s still below its 2010 peak, mostly due to unusually cold weather).
• Alternative supplies have failed to make up for the widening import gap. Its net imports have increased by more than 80 cubic meters since 2016 due to lower production in Europe. While Europe has successfully expanded its LNG regasification capacity to around 250 cubic meters per year in 2020 (40% more than in 2010), growing imports of LNG have not fully met the increased import demand. Furthermore, Europe is a balancing market for global LNG supply: it can absorb excess LNG supply when the market is oversupplied, or redirect LNG cargoes when the market is tight. Europe is also competing with Asia to buy LNG. Imports from North Africa (Algeria, Libya) have decreased, while imports from Azerbaijan remain modest, estimated at 15 bcm in 2021 (equivalent to 8% of Russia’s gas supply to Europe).

the story is originally published Columbia University Center for Global Energy Policy.at this Related PostsAnne-Sophie Corbeau explains what restricting energy flows means for countries that depend on Russian gas.