With the Ukrainian crisis yet to be resolved, preparation for a worst-case scenario is a critical issue when considering energy security in Europe. Russia supplies just under 40% of Europe’s natural gas, with the vast share of the remainder coming via pipelines from Norway and Algeria or supplied by LNG.

Geopolitical tensions and the outbreak of war, on top of one of Europe’s major pipelines, have led to serious concerns about security of supply. The top Russian importers—Germany, Turkey, and Italy—are right to be concerned about where replacement supply could come from. Germany imports roughly a third of Europe’s gas, and a massive fraction of German gas is Russian (32% as of December 2021, 49% overall in 2019). The nation’s closure of nuclear power facilities in favour of gas may leave it in a position that feels compromised in order to protect its citizens.

The fundamental problem is the size of the import market. Despite the highly variable distribution of national energy markets, the overall EU primary energy consumption saw natural gas making up over 22% of total energy needs in 2019, leaving Russia alone supplying nearly 9% of European energy as gas. A sudden loss of the gas supply would be a terrible and devastating blow to nations that rely heavily on gas to supply power and heating.

There are five major pipeline networks into Europe from Russia. In order of increasing concern, these are the Blue Stream line, TurkStream, the Yamal pipeline, and the two Nord Stream pipelines, and the Ukrainian pipeline networks. The Blue Stream line, supplying 16bcmpa, almost exclusively feeds Turkey and is of minimal concern to the wider EU. TurkStream crosses the Black Sea and supplies 31.5bcmpa to the Balkan states.

The Yamal pipeline, supplying 33bcmpa, runs via Belarus into Poland and Germany, and is not likely to suffer significantly due to strong ties between Belarus and Russia.

The two Nord Stream pipelines, at 55bcmpa each, are where current geopolitics starts to get spicy. Nord Stream 1 is well out of the way and, barring a move to cease exports from Russia entirely, will likely remain in operation. Nord Stream 2, however, has been undergoing approvals with the German energy regulator after finishing construction in September 2021.

German regulations state that the operating body must be a German company or subsidiary, which Gazprom, the Russian operator, had hoped to circumvent. Originally slated for roughly the end of the March quarter of 2022, then the second half of 2022, the entire process is now on hold, pending a resolution to the Ukraine crisis, and is not likely to proceed any time soon.

Excluding Blue Stream, currently operating Russian gas supplies 159.5bcmpa into Europe, the equivalent of over 115Mt of LNG. For clarity, Australia, the world’s largest producer of LNG in 2021, exported 83Mt of LNG that year. Qatar, the world’s second-largest supplier, sold 75Mt, and rapid up-and-comer the US came in third at just under 66Mt.

Russia supplies one and a half times as much gas as the world’s largest LNG producer exports annually. LNG is also a market that is usually under contract – over 65% of global LNG is contracted, and thus not available once the spot market is filled. The US has been making overtures to allies and neutral parties to encourage supply, but without enough success to swing opinion. Some agreements were made, with Australia, Qatar and even Japan agreeing to divert some shipments.

The US has also increased its own exports to the EU and the UK, growing from 0.1bcm in November 2021 to 0.18bcm in January 2022, but even from looking at the numbers it seems absurd to say it can fully supply Europe alone.

All of this is before considering the transportability of gas. It is not oil or coal, which in the worst case can theoretically be transported in a barrel. Gas requires complex, expensive infrastructure – whether that’s pipelines or oceangoing transport terminals – that is known for being some of the most capital-intensive in the world.

Venture Global’s recently started LNG facility, Calcasieu Pass, aims to export 10Mt of LNG every year, one-tenth of Europe’s needs. It also cost US$4.5bn, a significant expense for what amounts to only a fraction of the continent’s prospective LNG requirements.

The import side is also crucial – regasification terminals, while not as expensive as liquefaction and export terminals, are certainly not cheap. Grecian operator Gastrade’s proposed Alexandroupolis LNG is targeting start-up in 2023 and is expected to cost roughly US$330m for 4.5Mtpa capacity.

The economic considerations are what ultimately drove Germany to invest in Nord Stream 2 over significant LNG investment. The cost of not just construction but ongoing supply of LNG was deemed too expensive when compared to Russian pipeline gas, an equation that may now be changing. The first German LNG terminal, Brunsbüttel LNG, is expected to be constructed and operational in 2024-2025 for 5Mtpa capacity.

While European LNG import terminals averaged 25% utilisation in 2017, this has grown to reach roughly 36% over the 12 months to September 2021, and is expected to rise further as data from the high-demand last months of 2021 comes in. To construct the capacity to import 100Mt of LNG would cost roughly US$7.3bn, a cost that is expensive, but affordable. The next concern is the time it will take to design, finance and build such a large array of plants across the continent, assuming supply availability.

Construction projects of this scale are not instantaneous, and even with a high drive for approvals, drafting design, finding investment and contracting building materials and engineering firms takes years. A typical ‘accelerated’ timeline can manage a three- to four-year build from first proposal, but the kind of glut caused by such a spike in demand cannot be accommodated easily.

Beyond liquefaction and regasification terminals, there are also issues with transport fleets and shipyard capacity, as well as alternate demand pressure coming from Asia as China attempts to stabilise and develop its own energy market.

Qatar’s planned growth will expand its LNG exports by 30Mt by 2028, and the US market’s rapid growth over the short to medium term will potentially see an extra 75Mt of supply in the same period. Over that period, a significant shift away from pipeline gas and towards LNG may yield benefits in geopolitical independence, but direct competition with increasing demand from Asia may be too expensive for European wallets.

Ultimately, while LNG will be a key part of the energy independence movement in Europe, it cannot simply snap into place. The potential market is simply too large, and LNG is not oversupplied enough as a global commodity to absorb the kind of shock that an abrupt end to pipeline gas out of Russia would cause.

In the long term, geopolitics and a desire for national and regional energy security will see an increased drive for gas diversification, even at the higher overall prices demanded by LNG over pipeline gas.