Europe's gas supply woes worsen

By Gavin Maguire, Global Energy Transition Columnist

Happy New Year Power Up readers! The year 2025 looks set to be another volatile and dynamic one for the global energy sector. Europe's power markets are already facing a fresh fall in Russian gas supplies after pipeline flows through Ukraine halted on Jan 1.  That should bode well for LNG exporters. In contrast, year-ahead  polls suggest crude oil supplies will remain abundant due to weak demand in China and rising output in the United States once President Donald Trump retakes office. More on that and more below...

Europe's gas storage facilities, like this one in Spain, will play a key role in aiding regional power generation in 2025. REUTERS/Albert Gea

Europe's natural gas consumers were dealt a fresh blow on Wednesday as Russian gas exports via Soviet-era pipelines running through Ukraine came to a halt. 

The gas had kept flowing despite nearly three years of war, but Russia's gas firm Gazprom said it had stopped at 0500 GMT after Ukraine refused to renew a transit agreement.

The widely expected stoppage will not impact prices for most consumers in the European Union - unlike in 2022, when falling supplies from Russia sent prices to record highs, worsened a cost-of-living crisis and hit the bloc's competitiveness.

The last remaining EU buyers of Russian gas via Ukraine, such as Slovakia and Austria, have arranged alternative supply, while Hungary will keep receiving Russian gas via the TurkStream pipeline under the Black Sea. 

That said, Europe's power producers continue to rely on natural gas to generate over 25% of regional electricity supplies, and so will burn through large volumes of gas in 2025 regardless of Russian flows. That bodes well for large exporters of liquefied natural gas (LNG), especially in top supplier USA where Cheniere Energy and Venture Global both announced recent expansions in export capacity.

U.S. LNG exports climbed to a record 15.2 billion cubic feet on the last day of 2024, and look primed to rise to fresh highs in 2025 should the incoming Trump administration approve more export capacity and spur higher gas output as expected. U.S. natural gas prices recorded their largest annual rise since 2021 last year thanks in part to booming LNG exports. 

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