Cost Analysis and Strategic Implications of Liquefied Natural Gas (LNG) in European Energy Diversification

Details

Supervisors

Agrell, Per Joakim

Faculty

Louvain School of Management

Degree label

Master [120] en sciences de gestion, à finalité spécialisée

Abstract

The brief explores the economic and strategic dimensions of LNG as an alternative to traditional Russian pipelines. The research focuses on comparing the costs of producing and transporting LNG from major suppliers, such as the United States and Qatar, with the costs of gas transported by pipeline from Russia. This comparison is part of the European Union's efforts to diversify its energy sources, particularly in response to the geopolitical disruption caused by Russia's invasion of Ukraine in 2022. The study uses a detailed cost analysis framework, breaking down the LNG supply chain into upstream, midstream and downstream segments. It also uses the Herfindahl-Hirschman Index (HHI) to assess the market concentration of gas suppliers in Europe over the last decade. The results reveal significant variations in costs between LNG suppliers and highlight the economic advantages and disadvantages associated with each. The brief concludes that, although US LNG has higher costs, Qatari LNG offers a more competitive price, making it a viable alternative to Russian gas. The results underline the importance of continued investment in LNG infrastructure to enhance Europe's energy security and reduce dependence on single suppliers. In addition, the study highlights the role of diversified energy sources and reduced consumption in mitigating price volatility and improving market resilience.