Acer’s European LNG Market Monitoring (MMR) report analyzes global and EU market developments and recommends further actions to improve transparency, competition and flexibility at European LNG terminals.
Monitoring shows that during the energy crisis, the EU managed to secure gas supplies and diversify gas imports from Russia, with LNG playing a key role in this change.
Since 2022, more than 50 billion cubic meters of new LNG regasification infrastructure in the EU has eased supply congestion and helped reduce the price gap between European gas hubs and spot LNG prices.
The EU is the largest LNG import market (with 134 billion cubic meters of LNG imports in 2023) and the United States the largest exporter (119 billion cubic meters in 2023).
In 2023, Europe imported 18 billion cubic meters of Russian LNG, mostly from long-term contracts signed before 2022. At least 1 billion cubic meters, but possibly more, is re-exported to Asian markets through LNG refills.
LNG demand in the EU is likely to reach its peak in 2024. This is due to the reduction in demand for structural gas driven by the EU’s ambitious decarbonisation goals.
The 19 global liquefaction projects under construction are set to increase LNG production by around 200 million tonnes by 2030, equivalent to half of current annual trade.
Around 75% of the LNG import capacity added in the EU from 2022 consists of floating storage and regasification units (FSRUs). This allows for the potential repurposing or relocation of these floating infrastructures should their use decline significantly.
REPowerEU’s targeted gas demand reduction scenario (if it materializes by 2030) could shift the EU’s dependence on the LNG spot market, transforming an “undercontracted” state of 49 billion cubic meters in 2023 into a of “overcontract” of 30-40 billion cubic meters. between 2027 and 2030. Undercontracting means insufficient long-term contractual commitments that increase buyers’ dependence on the more volatile spot market. Overcontracting means that long-term contracts exceed demand. Nonetheless, excess long-term commitments should not pose a burden thanks to the flexibility of free-on-board (FOB) contracts, which allow surplus LNG to be sold on the spot market or redirected elsewhere.
Contrary to general belief, the EU remains more dependent on long-term LNG contracts than on spot ones (2 thirds versus 1 third). TTF serves as the predominant indexing term for EU spot contracts (64%), but not for long-term ones (where Henry-hub and Brent indexings are dominant).
