Siberian LNG Flows: A 2024 Analysis

In 2024, the European Union (EU) witnessed a surge in liquefied natural gas (LNG) imports from Siberia, setting new records. While these imports help meet some energy needs, they aren’t enough to make up for the loss of pipeline gas. This shift highlights the complex energy dynamics in Europe following Russia’s aggression in Ukraine.

Record LNG Imports, Limited Impact

The EU imported a record 16.5 million tonnes of Russian LNG in 2024, equivalent to approximately 8 billion cubic meters of gas. However, this volume is only sufficient to meet the annual gas demand of a smaller EU nation, underscoring its limited role in replacing the substantial pipeline supplies previously received from Russia.

The Rise of Spot Market Contracts

A notable shift has occurred in how Russian LNG is acquired. One-third of the imports in 2024 came through short-term spot contracts, a jump from 23% in 2023. This move reflects a transition away from traditional long-term agreements towards competitive pricing. Russian LNG from the Yamal terminal has been significantly cheaper than U.S. alternatives, making it an attractive option for European traders.

Reduced Dependence on Russian Gas

While LNG imports have increased, Europe’s overall reliance on Russian gas has significantly decreased. Russian gas, including both LNG and pipeline flows, now accounts for only 16% of the EU’s total imports, down from 40% historically. This shift is a result of Europe’s efforts to diversify its energy sources following the conflict in Ukraine.

Ukraine Transit Agreement Ends

The end of the Ukraine transit agreement in January 2025 further complicates Russia’s situation. This cessation of gas transit will cost Russia an estimated $6.5 billion annually in lost revenues, while Ukraine loses $1 billion in transit fees, underscoring Russia’s vulnerability in the altered energy landscape.

EU’s Balancing Act: Record Russian LNG Amid Reduced Dependence

Supply Stability and Price Volatility

Despite the halt in some pipeline flows, industry experts assure that smaller EU nations remain adequately supplied through alternative LNG routes. However, the market could still see price spikes during prolonged cold spells. While most households are shielded by long-term supplier contracts, the overall energy market remains susceptible to geopolitical and economic pressures. Gas infrastructure operators confirm that LNG and pipeline gas are technically interchangeable once integrated into the system, further adding to the complex nature of the market.

Frequently Asked Questions (FAQ)

What is the significance of the record Russian LNG imports in 2024?

While the EU imported a record 16.5 million tonnes of Russian LNG in 2024, this volume only covers the annual gas needs of a smaller EU nation, and thus does not fully address the need to replace all Russian pipeline supplies.

What does the shift to spot market contracts mean?

The increase in spot contracts means that European traders are increasingly buying Russian LNG at competitive prices on the open market, rather than through traditional long-term agreements, with Yamal LNG being notably cheaper than U.S. alternatives.

How has Europe’s dependence on Russian gas changed?

Europe’s dependence on Russian gas has significantly decreased from 40% historically to approximately 16% today, combining both pipeline and LNG supplies. This is a result of diversification efforts following the conflict in Ukraine.

What is the impact of the end of the Ukraine transit agreement?

The end of the Ukraine transit agreement in January 2025 will further limit Russian pipeline gas availability to Europe. This is expected to cost Russia $6.5 billion annually in lost revenues, and Ukraine $1 billion in lost transit fees.

Is the EU energy supply secure given these changes?

Smaller EU nations are reportedly adequately supplied through LNG imports, despite the reduction in pipeline gas flows. However, price volatility, particularly during cold spells, remains a potential issue for the broader market.