The EU is the biggest importer of natural gas in the world. Diversification of supply sources is therefore very important both for energy security and for competitiveness.
Liquefied natural gas (LNG) is natural gas, predominantly methane, converted to liquid form for ease of storage or transport.
The liquefaction process involves cooling the gas to around -162 °C and removing certain impurities, such as dust and carbon dioxide. As a liquid, LNG takes up around 600 times less volume than gas at standard atmospheric pressure, which facilitates its transportation over long distances without the need of pipelines, generally in specially-designed ships or road tankers.
When it reaches its final destination, LNG is usually re-gasified and distributed through gas networks, just like gas from pipelines. LNG is also increasingly used as an alternative fuel for ships and lorries.
Importance of LNG for the EU's security of supply
Ensuring that all EU countries have access to liquid gas markets is a key objective of the EU's energy union strategy. LNG can contribute to enhancing the diversity of gas supply and improving energy security in the EU. Today, countries in Europe that have access to LNG import terminals and liquid gas markets are far more resilient to possible supply interruptions than those that are dependent on a single gas supplier.
Cargoes of LNG are available from a wide variety of different supplier countries worldwide, and the global LNG market is undergoing a dynamic development with the entrance of new suppliers such as the United States, Russia and Australia.
In 2021, 13 EU countries imported a total of 80 billion cubic metres (bcm, gas equivalent) of LNG, 4% less than the previous year. LNG imports made up 20% of total extra-EU gas imports in 2021. The biggest LNG importers in the EU were Spain (21.3 bcm), France (18.3 bcm), Italy (9.3 bcm), the Netherlands (8.7 bcm) and Belgium (6.5 bcm).
Consumption and demand
Natural gas currently represents around a quarter of the EU's overall energy consumption. About 26% of that gas is used in the power generation sector (including in combined heat and power plants), and around 23% in industry. Most of the rest is used in the residential and services sectors, mainly for heat in buildings.
The EU's gas demand is around 400 billion cubic metres (bcm) and, based on current policies, is projected to remain relatively stable in the coming years. Domestic gas production is expected to decline, which is likely to have an impact on gas imports.
At the same time, policies designed to contribute to achieving the 2030 energy and climate targets, such as energy efficiency improvements in heating and industry, may result in a drop in overall gas usage across the EU.
Production and imports
Around 10% of the EU's gas needs are currently met by domestic production. The rest is imported, mainly from Russia (41%), Norway (24%) and Algeria (11%), beyond LNG sources, as 2021 data shows.
In recent years the share of LNG has stabilised, accounting for around 20% of imports in 2021, with most of these coming from the United States (28%), followed by Qatar and Russia (both around 20%), Nigeria (14%) and Algeria (11%).
Qatar is currently by far the world's largest supplier of LNG, at around 170 bcm per year. Other large (>20 bcm) suppliers include Australia, the United States, Nigeria, Malaysia, Russia and Indonesia. Global liquefaction is set to further increase dramatically as new plants in the United States and Australia will come on stream over the next few years.
The EU's overall LNG import capacity is significant (around 157 billion cubic metres in regasified form per year) – enough to meet around 40% of total current gas demand. However, in the regions of South Eastern Europe, Central and Eastern Europe and the Baltic, many countries have less access to LNG and/or are heavily dependent on a single gas supplier, and would be hardest hit in a supply crisis. It is important to make sure that such countries have access to a regional gas hub with a diverse range of supply sources, including LNG.
Based on the list of EU's Projects of Common Interest' (PCIs), the LNG strategy includes a list of key infrastructure projects which are essential to ensure that all EU countries can benefit from LNG.
With any new infrastructure, commercial viability is very important. For a LNG terminal, its utilisation across a whole region, or the choice of lower costs and more flexible technologies such as floating storage and regasification units (FSRUs), may considerably improve its viability.
LNG terminals, as other energy infrastructure, should be financed through end-user tariffs (investment is paid for by all gas consumers as part of their monthly gas bill); in some cases, gas companies bear the costs of construction (the investment is borne by a number of companies in exchange for the right to use the terminal through long-term capacity booking). But even with a sound business case, financing may still be a challenge in some cases.
For projects that are particularly important for security of supply, EU funds, such as the Connecting Europe Facility, could potentially help fill the financing gap. EIB loans and the European Fund for Strategic Investments (EFSI) may be other sources of long-term financing.
- Factsheet: EU-U.S. LNG TRADE U.S. liquefied natural gas (LNG) has the potential to help match EU gas needs (February 2022)