Replacing Russian natural gas in Europe could be challenging in short term and it will keep gas prices high, Fitch Ratings said on Friday.
Europe imports around 60% of its total natural gas demand, as Russia is supplying about a third of the continent’s consumption – 152 billion cubic meters (bcm) by pipeline and 17 bcm as liquefied natural gas (LNG), it said.
The dependence on Russian gas varies by country with Germany and Italy importing the highest volumes, it added.
The global rating agency said Europe plans to replace around 100 bcm of Russian gas by the end of this year with 50 bcm from additional LNG supplies from elsewhere, with rest of it coming from wind and solar expansion, energy savings and diversification of pipeline gas sources.
The EU has sizeable LNG import capacity of about 157 bcm a year, of which only 80 bcm was used in 2021, leaving room for additional volumes, it said.
"However, most LNG import terminals are concentrated in Spain, Portugal, France and Italy with limited existing pipeline infrastructure to deliver gas to Germany and some Central and Eastern European countries that are most dependent on Russian pipeline gas," Fitch Ratings said.
"We believe the EU plan is feasible in the medium term, if proposed increases in LNG capacity materialize, while competitive gas prices in Europe keep redirecting LNG from Asia, on the top of additional pipeline supply from Algeria, and growing renewables and energy efficiency," it added.