In the current month, almost 60 per cent of all European LNG imports come from the USA. The possible lifting of sanctions against Russian natural gas could decisively change the role of the USA as the world’s largest LNG exporter.
Study by S&P Global
A study published by S&P Global last week concludes that the lifting of sanctions against Russian natural gas in the USA would jeopardise LNG projects amounting to 29 million tonnes per year (FIDs) and associated investment decisions totalling USD 120 billion.
The study distinguishes between three scenarios: In scenario 1 (‘Current Trend’), Russian LNG and pipeline gas continues to flow to Europe via the TurkStream pipeline. The existing sanctions continue to apply. According to the study, this results in LNG projects (FIDs) for the USA amounting to 33.7 million tonnes per year in the period from 2025 to 2027.
Return of Russian gas, a risk for the USA
In scenario 2 (‘Opening the Taps’), Russian natural gas returns to the European gas market via pipeline to a limited extent. The lifting of sanctions leads to an expansion of Russia’s LNG export capacities. US FIDs fall to 16.5 million tonnes per year in the period from 2025 to 2027.
Scenario 3 (‘Phasing Down’) largely considers the effects of the EU Commission’s proposed ban on Russian gas imports and stricter sanctions against Russia. For this scenario, the study calculates an expansion of US LNG projects to up to 45.5 million tonnes per year in the period from 2025 to 2027.
Decisions with a global impact
Based on the current trend, US LNG projects account for around 42% of all LNG projects worldwide for the years 2025 to 2027. If Russian gas returns according to scenario 2, the US share falls to 29 per cent worldwide. In the ‘phasing down’ scenario, the US share would increase to just under 50 per cent worldwide.
According to the study, the scenarios would have significantly different effects on the global gas supply for the period from 2030 to 2040. A European ban on Russian natural gas would be replaced by US LNG supplies by around two thirds. The global LNG market would remain tight and the resulting high price level would lead to a slight decline in demand.
In the ‘Opening the Taps’ scenario, sales of Russian natural gas would increase by 30 million tonnes per year. US LNG imports would fall by 17 million tonnes per year, and LNG exports from the Middle East would also fall by around 5 million tonnes. Cheaper gas prices would increase annual gas demand by around 7 million tonnes per year.
Impact of the ban on Russia
A European ban on Russian gas imports would have serious consequences for Russia. Russia is currently the fourth largest LNG exporter in the world and is planning to expand this position with further projects. With a capacity of around 17 million tonnes of LNG per year, the Yamal-LNG plant is currently Russia’s largest export terminal. On average, two thirds of the capacity has been sold to the EU every year since 2022.
The loss of access to the European market and the higher transport costs for accessing the Asian markets would probably lead to a significant decline in LNG production at Yamal-LNG in the medium term. It is questionable whether the Arctic-2-LNG and Murmansk projects would then be expanded further.
A ban on Russian natural gas in the EU would certainly be an important political measure. Nevertheless, it remains a double-edged sword in terms of supply diversification, as it could make the USA the largest importer of natural gas in Europe in the medium term, ahead of Norway.