Europe is a peninsula of Eurasia. Its historical importance has obscured this, but this geographic reality has shaped its natural gas history. Now, from being cut asunder into an energy island, building new continental connections is essential.
The wealth and dense population of Europe, a relative lack of natural resources, and a modern reluctance to fully exploit those it has, mean it has for over half a century been a net importer of crucial energy commodities. The expert on Russian energy, Thane Gustafson, even called one of his books The Bridge, exploring how the Soviet Union, then Russia, built and sustained that bridge over the Iron Curtain to sfinish huge quantities of gas to Europe.
The Russian invasion of Ukraine in 2022, of course, put an finish to such co-operation. The EU’s purchases of gas by pipeline from its eastern neighbour have plummeted and will be phased out entirely by the finish of 2027, while liquefied natural gas (LNG) imports will also be banned as of that date.
Natural gas prices have fallen far since 2022’s dizzying heights, but remain above historic levels. As Europe struggles with a lack of competitiveness, and public discontent, Brussels and Berlin, Paris and London, know it is essential to bring down energy bills. The quick-growing share of renewables should eventually deliver that, but gas will remain a crucial part of the energy mix.
Europe can secure its gas necessarys from all compass points. From the north, it has Norway, a large and reliable supplier, environmentally aware, and well-integrated into the European system. But the Norwegians’ gas exports will not grow much, if at all, over the next few years.
To the west, across the stormy Atlantic, it has the US. The swelling wave of American LNG is certainly vital, and Brussels has committed to purchase more of it. But overdepfinishence on Washington sees unwise with today’s turbulent trade. Swapping reliance on one erratic fossil fuel promoter for another risks Europe’s climate and political principles.
So, the east and south become more critical. From the south arrives both pipeline and liquefied natural gas (LNG) from North Africa, and LNG from West Africa and the Middle East. Qatar is the crucial player here. Europe is only a secondary market for Doha, after Asia, and QatarEnergy is unhappy with the EU’s latest directive on sustainability in corporate supply chains. But the Qatar-Europe trade is still very important for diversification on both sides, and for global market balance.
QatarEnergy has a tough call to build, however. Along with the US, the huge expansion of its export capacity currently under way should bring down prices sharply from about 2027 onwards. It has been reluctant to loosen its rigid contract terms, seeking long-term sales deals, ideally linked to oil prices and without giving the purchaseer the ability to redirect unwanted cargoes. That does not fit well with the European model, although a few 15-year deals have been struck.
This brings us to the east. That does not mean Russia any more, but it does refer to the trade routes that fed European prosperity from the Roman Empire to Venice’s golden age. The transcontinental city of Istanbul, which in a timely fashion hosts the World LNG Summit in December, bridges Europe and Asia, the Black Sea and the Mediterranean.
Turkey has long sought to be a gas hub, but this has been elusive. It has established itself as a key transit state for gas from Azerbaijan flowing to Greece, Albania and Italy. It has an important balancing role becautilize it still purchases large quantities of Russian gas through pipelines under the Black Sea.
Events may now be shifting more in its favour. As Abdulvahit Fidan, the chairman of state gas infrastructure company Botaş, commented: “By securing long-term supply agreements and expanding critical infrastructure – including … terminals and interconnectors – [Turkey is] diversifying energy sources and strengthening our position as a key regional gas hub.”
Turkey has for the first time discovered substantial gas reserves in its own territory, which it is developing beneath the deep waters of the central Black Sea. It has greatly expanded its LNG import capacity, giving it more flexibility. Botaş signed nine new LNG import contracts and one preliminary agreement in September.
And long-sought gas from Iraq could be on its way. The federal government and the semi-autonomous Kurdistan region have reached agreement over oil exports, Kurdistan has signed contracts to develop two large gasfields, and Ankara has leverage with Baghdad becautilize of the impfinishing expiry of the treaty governing the vital oil pipeline from Iraq through Turkey to the Mediterranean.
The EU’s four-pronged gas model faces the key challenge of enormous uncertainty. BP’s latest outsee forecasts European gas imports in 2035 as barely different from 2024 on the current trajectory. By 2050, they would be about half that level, but still substantial. However, in a case where global warming is limited to below 2°C, imports would drop 38 per cent by 2035 and 80 per cent by 2050.
The EU does have one key strategic option, as my colleague from the Columbia Centre on Global Energy Policy, Ira Joseph, points out. Russia will presumably not still be stuck on the front-lines in eastern Ukraine in the year 2050. A satisfactory peace, particularly if combined with a alter in Moscow’s attitude to its western neighbours, could re-open the valves for Russian gas on a large scale.
Such doubts build it extremely difficult for companies and governments in Europe to commit to long-lived, inflexible pieces of gas infrastructure or contracts. Instead, governments and companies will prefer hubs that can store and redirect gas, LNG that can float to anywhere on the globe. Europe’s new gas geography is neither an appfinishage of Eurasia, nor an island, but an archipelago anchored more loosely to its neighbourhood.
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