- Europe is set to end Russian gas and LNG imports by 2027, supported by long-term contracts with alternative suppliers.
- Drewry projects Europe’s contracted supply to be sufficient, reducing spot market exposure and enabling energy security without Russia.
- However, the region’s growing reliance on US LNG may become problematic, especially with potential US tariff impositions.
- LNG shipping will benefit from longer trade routes and increased demand, particularly for modern carriers, though gains may be moderate.
Europe has consistently voiced its intent to decouple from Russian energy since early 2022. While piped gas imports from Russia have declined, Russian LNG still constituted around 19% of Europe’s total LNG imports in 2024, with Belgium, France, and Spain among the key recipients. Nevertheless, the European Commission and member states are finalizing strategies to eliminate Russian gas and LNG by 2027.
Redirection of LNG Imports
The region has diversified its LNG sources, increasing imports from the US, Qatar, and African countries. The shift has disrupted global LNG trade flows and buoyed shipping rates. Most of Europe’s future needs are expected to be met through:
- Supply contracts signed since 2022, ramping up from 2026-27.
- Legacy agreements lasting through 2035-2040 (about 40 mtpa).
- Expanded regasification and storage infrastructure.
- Rising global LNG production capacity.
These arrangements are forecasted to reduce spot exposure from 35% (28 mtpa) in 2024 to just 9–10% (9–10 mtpa) by 2030.
Potential Complications from US Dependence
The US has emerged as Europe’s largest LNG partner, with over 60% of contracts signed post-2022 involving American suppliers. However, the dependence comes with risk. Proposed tariffs on European goods—up to 50% under a potential Trump administration—could disrupt the transatlantic trade balance and increase import costs.
Additionally, several of the contracted US supplies depend on under-construction or planned LNG export projects. As of May 2025, around 15 mtpa of Europe’s contracted LNG is tied to projects awaiting final investment decisions, while 18 mtpa is linked to ongoing developments. Delays or cancellations in these projects could raise Europe’s spot market exposure again.
Spot Market Buffer
Even in the event of project setbacks, Europe is expected to remain resilient. Global spot supply is projected to increase significantly by 2027–28, allowing the region to adjust purchases based on price and demand conditions. Long-term supply sufficiency, a moderate demand forecast (peaking below 2022 levels), and Europe’s push for decarbonization also suggest fewer new long-term contracts ahead.
Shipping Implications
As trade routes lengthen, particularly with more LNG arriving from the US, Qatar, and Africa, demand for shipping will increase. This supports rates for modern, two-stroke LNG carriers, particularly those compliant with strict environmental standards. However, with Europe’s demand expected to stabilize by the end of the decade, the impact on tonne-mile growth will likely remain moderate.
New Trade Corridors and Regional Rebalancing
As Europe reduces Russian imports, Russia is redirecting LNG to Asia. This shift supports price competitiveness for Asian buyers and boosts Arctic cargo movements, particularly if routed via the Cape of Good Hope due to Red Sea disruptions. That said, limitations in Russia’s ice-class fleet and growing US-Asia LNG contracts will temper Russia’s long-term share in Asia.
Outlook
While Europe seems on track to phase out Russian LNG, the shift comes with new dependencies and logistical challenges. LNG shipping stands to gain from expanded trade routes and increased vessel utilization, even as the overall tonne-mile growth remains steady rather than surging.
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Source: Drewry
