ACER: The EU will not shake off its dependence on spot LNG prices without stronger decarbonisation

The European Union is slowly weaning itself off fossil fuels from Russia, but replacing that dependence with another — reliance on spot prices for liquefied natural gas (LNG). To change this in the future, the Agency for the Cooperation of Energy Regulators (ACER) says it is necessary to step up decarbonisation efforts and thereby limit natural gas consumption in the EU. Securing flexible LNG supply contracts and improving transparency and coordination among key players in the sector should also help.

LNG’s share of total natural gas supply in EU countries rose from 23 % in 2020 to around 40 % in 2024. Despite a 17% drop in LNG imports compared with 2023, last year the EU was the world’s largest LNG importer, ahead of China and Japan, with 112 bcm. Roughly half of the EU’s LNG imports came from the US.

“The EU bought 30 bcm of LNG on the spot market, more than any of the other major importers,” ACER said, adding that the EU’s high dependence on spot LNG supplies is likely to continue until 2030 unless the pace of decarbonisation accelerates.

Not just price volatility, but uncertain demand too

According to the agency, price volatility associated with dependence on spot LNG prices is not the EU’s only problem. Another is uncertainty about future natural gas demand, which could result in an additional 30 bcm of LNG demand in 2030 compared with 2024, thereby prolonging dependence on the LNG spot market.

“Although natural gas demand is expected to fall in the medium term, securing additional contracted LNG volumes would significantly limit the impact of price volatility in the short term,” the agency said, adding that new LNG contracts should include flexibility over the delivery destination if they are long-term, or be structured as short- or medium-term contracts.

ACER also noted that the value of European import terminals cannot be assessed solely from the perspective of their utilisation. These terminals provide backup capacity for winter, support the filling of gas storage facilities, diversify gas supplies, help landlocked countries and support the integration of the European gas market.