BAKU, Azerbaijan, October 20. Europe could reduce its LNG imports by 20.8 billion cubic meters if shipments through the Strait of Hormuz are delayed.
This was stated in a report by the Oxford Institute for Energy Studies (OIES) titled “What Next for Hormuz LNG? Alternative Scenarios.”
The report notes that a decline in demand and imports of liquefied natural gas (LNG) will be the primary mechanism for balancing the global gas market should restrictions on shipments through the Strait of Hormuz persist.
According to the report, in a scenario where supplies resume in October 2027, the supply shortfall will amount to 49 billion cubic meters: “Other LNG exporters will increase supplies by 7.3 billion cubic meters, of which 6.5 billion cubic meters will come from Australia.”
“The remaining 41.7 billion cubic meters, or 85 percent of the shortfall, will be offset by reduced demand and LNG imports. Europe will account for a reduction of 20.8 billion cubic meters, China for 6.6 billion, South Asian countries for 5.4 billion, and Middle Eastern importers for 3.4 billion cubic meters.
If supply restrictions remain in place, the deficit in 2027 will increase to 66.8 billion cubic meters. At the same time, additional supplies from other exporters will total 15.6 billion cubic meters, of which 13.3 billion will come from Australia.
In this scenario, the reduction in LNG imports will offset 77 percent of the shortfall. LNG imports to Europe will decline by 20.5 billion cubic meters, which is virtually equivalent to the figure in the scenario where supplies resume in October 2027. The reduction in China’s imports will reach 11 billion cubic meters.
In the scenario where LNG supplies recover to 50% of pre-crisis levels, the deficit will amount to 41.4 billion cubic meters, while additional supply will total 12 billion cubic meters. LNG imports will decrease by 29.4 billion cubic meters, or 71% of the total deficit. Europe will account for a reduction of 12.2 billion cubic meters, and South Asia for 5.9 billion cubic meters,” the institute reports.
The report notes that Europe will bear the greatest burden of balancing the market, even though the region typically imports relatively small volumes of LNG from the Gulf countries: “In Europe, the adjustment will occur primarily through a reduction in gas injections into underground storage facilities in the summer of 2027, while the decline in actual consumption will be less significant.”
"In other regions of the world, the main adaptation mechanism will be a reduction in gas consumption. South Asian countries will also be forced to cut imports, which could lead to a more active shift toward coal and oil, as well as possible power outages.
Importers in the Middle East will lose 27–30% of their supplies but will be able to partially switch to liquid fuels for power generation and as feedstock for industry.
At the same time, Japan, South Korea, and Taiwan will reduce imports by no more than 1.2% in 2027 under any of the scenarios considered. The report attributes this to limited price differentials and the ability to finance purchases.
Additional LNG supplies in the scenarios under consideration will be provided primarily by Australia. According to the OIES, this is because, in the baseline scenario, uncontracted volumes of Australian LNG are displaced as supplies from the Middle East recover. “In the alternative scenarios, the supply balance becomes tighter, so these volumes are once again in demand,” OIES reports.
Furthermore, it is emphasized that U.S. LNG exports in 2027 will remain virtually unchanged, which is consistent with the current situation, in which U.S. liquefaction plants are already operating at full capacity.