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ACTIONS are currently underway to shift Europe’s dependence on Russian oil and gas as soon as possible. It may happen by 2030, if not earlier. It is a huge and difficult task but possibly with the supply of gas mainly from the USA. The next steps will then be related to dealing with the logistical challenges of all different kinds from the supply point in the USA and to the receiving facilities in Europe.
The USA today stands as the biggest gas producer in the world with about one billion cubic meters (bcm), followed by Russia, Iran, and Qatar. The USA is also the biggest gas exporter in the world, followed by Russia, Qatar, Norway, and Algeria. Last Friday, the USA agreed to promptly ship an additional 15 bcm this year, and then 50 bcm per year until 2030, which is 30 percent of the gas imported from Russia to the West. Perhaps then Europe would have secured enough gas supply from different regions in the world, including Algeria, Qatar, and Australia.
Russia on the other hand exports about $800 million worth of gas to Europe. Any disruptions or boycott of this will cause a huge loss of revenues, especially if the West stays away from the Russian gas supply, which will eventually cover the oil imports as well. Europe’s dependence on Russian energy is huge and hard to replace in such a short time. It will need to build new facilities and floating terminals for liquefied gas to be transformed to gas at the final stage at the receiving ports. The same is applicable to the export facilities in USA, which can not be ready or prepared on such a short notice.
The USA, with the cooperation of other gas exporters, will try to exchange and swap volume among themselves to make deliveries to Germany and other European countries such as Finland, which is about 90 percent dependent on Russian gas imports, and Germany is about 40 percent dependent. However, Germany has decided to move away from depending on Russian gas by 2024, if not earlier. Moving away from depending on one source of energy after years of addiction must come with some pain and sacrifices. Such pain will ease on the long run when the results become clear.
Switching suppliers on such a short notice is a very expensive route, and not easy as long as a new reliable alternative with large pocket of supply is available which would be an added value after the disputes settle. It could also turn out to be economical better for the West. For now, Europe is becoming freer from the Russian energy grip, and independent and free from any historical painful attachments.
By Kamel Al-Harami
Independent Oil Analyst