Modeling Europe's role in the global LNG market 2040: Balancing decarbonization goals, energy security, and geopolitical tensions

Abstract

This study examines the LNG trade in 2040, focusing on the role of Europe as an LNG importer. The conducted analysis reveals the complexities of Europe’s strategy of simultaneously achieving decarbonization objectives and resolving energy security concerns regarding LNG. The study proposes an optimization model to determine the optimal global LNG trade between exporters and importers. As an alternative for Europe to solely rely on imports, the potential substitution of imports with domestic natural gas production equipped with carbon capture and storage is considered. Herein, two scenarios (low and high LNG demand) are examined. The findings indicate that Europe plays a pivotal role in the global LNG market solely in the ambitious sustainable scenario, whereas its significance diminishes in the high-demand scenario. Examining the volumes of LNG sent to Europe, African exporters appear to be notably significant in meeting the demand. However, as global LNG demand rises, the discernibility of genuinely stable trends or patterns in trade declines. The value of long-term contracts may experience a resurgence in the future. Future work should include long-term contracts, allowing for fixed volumes of LNG to be traded. Furthermore, our obtained LNG supply costs for Europe can be seen as valuable inputs for large-scale energy system models aiming to optimize the sustainable transition of Europe’s energy infrastructure.