The Russian invasion of Ukraine did more than disrupt European energy supplies. It set off a race to strengthen the continent’s energy independence. Fears of gas shortages and soaring prices grew as the Kremlin turned gas into a weapon and sharply cut pipeline exports to Europe. In response, Europe pursued bold solutions, including the rapid construction of new LNG regasification facilities. These plants convert liquefied natural gas back into gas for distribution. Yet the pace of buildout has outstripped the near-term demand forecast. Analysts note a notable mismatch: Europe’s gas demand has fallen about 20 percent since 2021, according to data from the Institute for Energy Economics and Financial Analysis (IEEFA).
In the latest energy policy briefing, industry researchers report that European gas consumption dropped in 2023 to its lowest level in a decade. The decline is tied to a surge in renewable deployment, aggressive energy efficiency measures across the European Union, and an unusually mild climate. Projections from the IEEFA suggest demand will peak in 2025 and then gradually tighten further. Despite this, LNG regasification capacity continues to rise. Over the last two years eight new terminals have started operations, and four more expanded their capacity. Plans call for another 13 facilities to come online before 2030, widening the installed base significantly. This growth has led to the takeaway that the combined LNG regasification capacity in Europe could eventually exceed peak demand by as much as threefold toward the end of the decade, according to the IEEFA’s Europe lead analyst. In the last year, European regasification plants operated at an average utilization rate around 58 percent, with eight of the 37 facilities running below 50 percent. The trend suggests underutilization will persist as capacity outpaces demand through the rest of the decade. IEEFA’s baseline forecast estimates European LNG demand will not exceed 135 billion cubic meters (bcm) by 2030, leaving roughly 265 bcm of unused capacity.
A closer look at Spain exposes a striking paradox. The country has the most LNG regasification capacity in Europe, with seven plants, but also the highest underutilization. In 2023, utilization stood at only about 35 percent of capacity, based on IEEFA’s synthesis of public and private data. Experts warn that Spain’s large LNG import footprint could become a strategic liability if the demand peak arrives as early as 2025. The public cost of building and maintaining such infrastructure is high. Some new regasification facilities in Europe have already involved investments exceeding 1 billion euros, and because the sector is heavily regulated, much of those costs are reflected in consumer tariffs, according to Jaller-Makarewic of IEEFA. This dynamic raises questions about value for taxpayers and ratepayers as the continent navigates shocks and market shifts.
Beyond Spain, another key finding is that the European LNG market has become a major source of revenue for the Kremlin. Spain ranks as the top European importer of LNG from Russia in 2023, followed by France and Belgium. The trio together accounted for a substantial share of Russia’s LNG exports to the European Union, reinforcing how geopolitical dynamics continue to shape flows of energy across the region. In Spain, Naturgy has been the leading importer of Russian gas, with imports approaching 2.3 billion euros in the year prior to these estimates. These figures come from IEEFA data and underscore how energy policy and international relations intertwine in the current landscape.
Ultimately, the shift toward greater LNG capacity reflects a blend of strategic thinking and market forces. The goal is energy security and an orderly transition to cleaner energy, even as questions remain about the pace of demand changes, the distribution of costs, and the long-term role of LNG in Europe’s energy mix. The data point to a cautious outlook: while regasification capacity grows, utilization and demand must align to avoid creating stranded assets and burdening consumers with higher bills. The broader narrative remains that diversification, efficiency, and renewables are shaping a future where gas plays a transitional role rather than a dominant one, with Europe seeking to balance reliability, affordability, and climate objectives.
Notes on the figures are drawn from the Institute for Energy Economics and Financial Analysis and its public data partners. The assessments cited reflect observed capacity additions, utilization rates, and consumption trends shaping European gas markets as this decade unfolds. Analysts emphasize that policy design, market reforms, and regional cooperation will determine how much of Europe’s gas future is met by LNG and how much by domestic production and renewables. [IEEFA report attribution]