- Europe Rethinks LNG Supply as US Tariff Risks Loom.
- US LNG Dominance in Europe Under Threat from Diversification Efforts.
- Qatar, Africa, and Russia Emerge as Alternative LNG Suppliers for Europe.
The LNG market worldwide is facing a dramatic shift with the rising geopolitical tensions between Europe and the US creating new uncertainty. Recent policy debates involving possible tariffs and changes in energy strategies are likely to redraw patterns of LNG sourcing over the next few years, reports Drewry
Europe’s Increasing Reliance on US LNG
Since the Russia-Ukraine conflict, the US has emerged as Europe’s biggest supplier of LNG, with more than 70% of US LNG exports flowing to Europe in 2024. The location of US export terminals and the supply glut has fueled transatlantic LNG trade. A second Trump administration’s imposition of tariffs could make Europe seek diversified sources and diminish dependence on US energy.
Diversification Attempts and Other LNG Suppliers
Even in the absence of US-imposed tariffs, Europe is proactively diversifying its sources of LNG. The European Commission’s attempts to restrict Russian LNG imports have met with partial success, with Spain and France still importing substantial quantities. New LNG supply contracts with Qatar and African producers are anticipated to rise in 2025, curbing US hegemony in the European market.
Infrastructure Challenges in Southern Europe
Southern European nations, especially Italy and Spain, are hampered by infrastructural limitations that restrict their capacity to transport LNG throughout the continent. Poor pipeline connectivity has made Turkey a more reliant transit option, making it a prime position as a future gateway for Europe’s LNG.
Gradual Diversification While Importing US LNG
US LNG will continue to be Europe’s first choice in the near term based on its supply and upcoming liquefaction projects, including Plaquemines LNG (13.3 mtpa) and Corpus Christi Stage 3 (10 mtpa). European importers will, however, raise imports from other sources, including:
- Qatar: Will raise exports once Red Sea disruptions subside, although limited spot supply could limit volumes.
- Africa: New developments like Congo LNG (3 mtpa) and Greater Tortue Ahmeyim FLNG (2.5 mtpa) will help diversify European supplies.
- Russia: Sanctions notwithstanding, certain European buyers can still participate in long-term contracts.
As more European investments come to African LNG projects, Africa’s market share in Europe is likely to increase, lessening US dependence.
Impact on LNG Shipping and Freight Rates
A realignment of European LNG supply will change world trade patterns. Lower competition between Europe and Asia for US LNG would establish a more balanced trade pattern, boosting US-Asia shipments and tonne-mile demand. Although vessel oversupply may strain freight rates in the near term, long-term shifts in trade patterns indicate a healthier LNG shipping market.
Strategic Diversification and Rising Shipping Demand
In the long term, Europe will increasingly embrace a diversified LNG procurement strategy motivated by geopolitical threats and energy security. The main trends are:
- Qatar Increasing Market Share: North Field expansion schemes will increase more than 49 mtpa by 2027, solidifying Qatar’s position as a major supplier.
- Africa’s Increasing LNG Exports: Higher investments will make African producers large LNG suppliers to Europe.
- Uncertainty Around Russian LNG: While Europe aims to phase out Russian fossil fuels, some Eastern European buyers may still seek Russian LNG supplies.
US-Europe Tensions and Their Impact on LNG Markets
Although trade friction between the US and Europe might perturb LNG deliveries, they will also make new shipping opportunities. The projected move of European consumers to Qatar, Africa, and Russia will grow voyage length, while US exports switching direction to Asia will again add to tonne-miles demand.
In the near term, market volatility and ship oversupply could bear down on freight rates. Nonetheless, shifting structural changes in trade patterns bode well for a long-term comeback for the LNG shipping business. Reacting to these developing trade trends will be essential for LNG market players to achieve profitability in an evolving global energy matrix.
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Source: Drewry
