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Solving Europe’s energy challenge

13 September 2022

Published in partnership with

One of the most apparent aspects of the Russia-Ukraine conflict is the rapid increase in energy prices brought on by Moscow’s reduction in exports to its European neighbours.

In 2021, Russia was the largest exporter of oil and gas to Europe, supplying some 40 per cent of its energy requirements, including 100 per cent of the total gas imports of five EU states, according to the International Energy Agency.

The continent’s three largest economies – Germany, Italy and France – depended on Russian gas for 46 per cent, 34 per cent and 18 per cent of their energy needs, respectively. 

The imposition of sanctions on Russia in March 2022, followed by Moscow’s threat to suspend hydrocarbon exports, has resulted in a surge in energy prices.

Opec’s crude basket price increased from $78 a barrel at the start of the year to $122 in early June, while Henry Hub natural gas prices more than doubled from $3.8 a million British thermal units (BTUs) to $8.7 a million BTUs over the same period.

Expensive energy bills

This rapid energy inflation has been passed on to consumers through higher electricity bills.

In the UK, for instance, the energy regulator Ofgem estimates that the default tariff price cap will more than double from £1,300 ($1,529) in January to £3,580 in October, and reach a peak of £4,266 in the first three months of 2023, when demand will be highest during the colder winter months.

Replicated across the continent, this is likely to result in millions of households entering ‘fuel poverty’ as they struggle to pay their energy bills. 

The Mena region is well-positioned to plug the shortfall in Russian gas exports as European governments scramble to source gas from new markets to reduce their dependence on Moscow

Reducing reliance on Russia

The subject was not surprisingly a central theme of debate at Siemens Energy’s Middle East & Africa Energy Week held in June, where attendees agreed on two main conclusions drawn from the crisis. 

The first was that the Middle East and North Africa (Mena) is well-positioned to plug the shortfall in Russian gas exports as European governments scramble to source gas from new markets to reduce their dependence on Moscow.

The GCC alone globally exports almost exactly half of the 411 billion cubic metres of gas that Russia supplies to Europe annually. Most of this is in the form of long-term liquefied natural gas (LNG) contracts to east Asia, but there is some limited capacity available – primarily from Qatar – to fill part of the shortfall.

European nations have been quick to recognise this. For example, following a visit to the region by its Vice-Chancellor and Climate & Energy Minister Robert Habeck in March, Germany – Europe’s largest energy market – is now fast-tracking the construction of two LNG import terminals and has entered a long-term energy partnership with Qatar, the world’s largest LNG exporter. 

Energy Week

The second principal finding from the Middle East & Africa Energy Week was that the conflict would act as an additional catalyst for renewable energy development as nations globally attempt to diversify their energy sources and reduce their dependence on imported fossil fuels. 

This was in keeping with the results of a poll of up to 400 of the event’s participants. The survey, which forms the central component of the Siemens Energy’s Middle East & Africa Energy Transition Readiness Index, revealed that attendees considered the acceleration of renewables as the highest priority among 11 energy policies in their efforts to tackle the climate crisis, as well as the one with the greatest potential impact.

The Middle East is already taking a clear lead in this as it sets ambitious targets for clean, renewable capacity. For example, Saudi Arabia is looking to scale up its share of gas and renewable energy in its energy mix to 50 per cent by 2030.

Similarly, the UAE has set ambitious targets for 2050: to improve energy efficiency by 40 per cent, reduce emissions from the power sector by 70 per cent and increase the share of renewables in the energy mix to 44 per cent.

While Europe is looking for alternative gas supplies to urgently fill the gap in the short term, there is little doubt that in the longer term renewable energies and hydrogen will dominate the energy markets

Dietmar Siersdorfer, Siemens Energy

Hydrogen

In the long run, the energy crisis also provides momentum for the development of hydrogen production in the region, one of four other central themes emerging from the Energy Week. 

Demand for hydrogen in Europe alone is forecast to double to 30 million tonnes a year (t/y) by 2030 and to 95 million t/y by 2050. Thanks to its geographical position, the Middle East is ideally located to meet this demand either by ship or pipeline. 

Today, there are at least 46 known green hydrogen and ammonia projects across the Middle East and Africa, worth an estimated $92bn, almost all of which are export-orientated.

“While Europe is looking for alternative gas supplies to urgently fill the gap in the short term, there is little doubt that in the longer term renewable energies and hydrogen will dominate the energy markets. That the robust mix of the energy (gas and renewables) will make the energy system more resilient and support energy supply security while we, at the same time, move us at a fast pace into a renewable future,” says Dietmar Siersdorfer, Siemens Energy’s Managing Director for the Middle East and UAE.

Electricity to Europe

Another unintended consequence of the Ukraine crisis is to turn attention to direct electricity supply from the Mena region to Europe. 

Although plans for exploiting the high solar irradiation levels and space provided by the Sahara desert through initiatives such as DESERTEC have long been mooted as an alternative solution, a combination of the crisis, lower costs and improving technologies are increasing impetus.    

Some projects are already capitalising on the trend. For example, a joint venture of Octopus Energy and cable firm Xlinks recently received regulatory approval for a 3.6GW subsea interconnector between Morocco and the UK, using energy produced from vast solar arrays in the desert. 

A similar project is the 2GW high-voltage EuroAfrica connector currently under construction linking Egypt with Greece via Crete. Plans are also under way for a third power connection between Morocco and Spain, which today is the only operational electricity link between Africa and Europe.

With the Egyptian-Saudi interconnector now under construction, and agreements recently reached for interconnectors between Saudi Arabia and Jordan and Kuwait and Iraq, the region is growing closer to supplying power to Europe directly.

“The development of regional grids has brought the prospect of direct current connection with Europe ever closer,” says Siemens Energy’s VP and Head of Grid Stabilisation in the Middle East, Elyes San-Haji. “Due to its plentiful solar resources, the Mena region could become an energy hub with a global network of high-voltage highways and super grids.”

Connection benefits

Interconnection makes sense on many levels. Not only would Europe benefit from a diversified, economical and renewable energy source, but its season of peak demand, winter, coincides with when supply is lowest in the Middle East, and vice-versa. Power transfer would not necessarily have to be in one direction only. 

The Ukraine conflict and ensuing energy crisis have created an unprecedented opportunity for the Middle East and Africa to become more closely integrated with Europe. Whether in the form of fuel exports, either gas or potentially green hydrogen fuels, or direct electricity supply, the Arab world has never had a better chance to become the energy partner of choice for its European neighbours.

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    9 March 2026

    Commentary
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    The 28 February attack by the US and Israel on Iran, and the chaotic conflict that has ensued, has dramatically eroded the image of liquefied natural gas (LNG) as a stable and reliable source of energy, removing around 20% of global LNG supply from the market.

    Within the Middle East and North Africa (Mena) region, disruption to LNG production and distribution has left countries including Egypt and Kuwait with serious concerns over energy supplies.

    Beyond the Mena region, major economies in Europe and Asia are also badly impacted by an absence of shipments from Qatar, one of the world’s biggest LNG producers, which stopped production of LNG on 2 March due to military attacks on several facilities.

    Qatar subsequently declared force majeure on 4 March, helping to push benchmark gas prices to multi-year highs. The Dutch Title Transfer Facility (TTF) rose by more than 80%, hitting its highest levels since fuel markets spiked following Russia’s 2022 invasion of Ukraine, while Asian LNG spot prices also hit three-year highs.

    The latest wave of turmoil for countries that are reliant on LNG has undermined the image of the fuel as a flexible and reliable source of energy, which was widely regarded as one of its key advantages.

    When Kuwait signed its 15-year LNG supply contract deal with Qatar in 2020, Saad Sherida Al-Kaabi, the president and chief executive of Qatar Petroleum, said: “We are confident that the exceptional reliability of our LNG supplies will provide KPC [Kuwait Petroleum Corporation] with the required flexibility and supply security to fuel the State of Kuwait’s impressive growth.”

    Similarly, in Egypt last year, when Prime Minister Mostafa Madbouli made an announcement about bringing a third floating LNG import terminal online, an official government statement said that the terminals would be “ensuring stable energy for households and industry”.

    The latest crisis has highlighted that, in some ways, the LNG market can be even more dramatically disrupted by geopolitical issues than the oil market.

    Unlike the oil market, where producers such as Saudi Arabia maintain spare capacity and US shale producers quickly ramp up production if prices move higher, LNG facilities typically operate close to full capacity, leaving few options to boost production if other producers go offline.

    On top of this, compared to the oil market, much more of the production relies on a relatively small number of producers and transport routes.

    Kuwait’s gas crunch

    In recent years, Kuwait has invested billions of dollars in an energy strategy that has made it structurally reliant LNG imports, and the centerpiece of the country’s LNG infrastructure is its $2.9bn Al-Zour import terminal, which was brought online in July 2021.

    It is the country’s first permanent facility to import LNG and has allowed the country to take delivery of large volumes of gas.

    Between March 2025 and February 2026, Kuwait imported 7,352 kilotonnes (kt) of LNG, making it the second-biggest importer in the Mena region after Egypt, according to data recorded by the market analytics company Energy Aspects.

    The vast majority of Kuwait’s imports came from Qatar, with significant additional volumes also coming from Oman and Nigeria.

    Now, as a result of fallout from the Iran war, Kuwait is going to face serious issues surrounding gas imports, at least in the short term.

    With the Qatari LNG export facilities offline, the Al-Zour facility can’t receive shipments from Qatar, and due to Iran’s Revolutionary Guard Corps (IRGC) effectively closing the Strait of Hormuz, ships cannot reach Kuwait’s import terminal from Oman or Nigeria.

    The gas shortage in Kuwait is also likely to be exacerbated by Kuwait cutting oil production due to an inability to export crude via the Strait of Hormuz.

    On 7 March, state-owned KPC said it had implemented a precautionary reduction in crude oil production due to “threats against safe passage of ships through the Strait of Hormuz”.

    Shutting in production at oil fields will mean that the country will not be able to gather as much associated gas that is produced alongside the crude oil and feeds some domestic power stations.

    Just how severe the consequences of Kuwait’s gas crunch will be remains to be seen.

    Several of Kuwait’s gas power plants have been designed to be able to run on fuel oil in emergencies, so it is possible that the country will be able avoid widespread blackouts.

    When these powers stations are switched to oil they are usually less efficient and have more maintenance issues.

    Last summer, even without a major gas shortage, the country was forced to resort to rolling power cuts across some regions due to high electricity demand and insufficient generating capacity.

    Egypt uncertainty

    Egypt, the Mena region’s biggest LNG importer, is also going to face uncertainty over its LNG supplies in coming months.

    Between March 2025 and February 2026, Egypt imported 9,440kt of LNG, but unlike Kuwait, the majority of its imports are purchased through more short-term agreements, mainly with third parties like trading houses.

    Last year, it was reported that Egypt had signed deals for around 150 cargoes through to the summer of 2026.

    While much of Egypt’s LNG is likely to come from the US, and won’t be directly impacted by the effective closure of the Strait of Hormuz, the recent surge in LNG prices could mean that the North African country will struggle to afford shipments.

    Slava Kiryushin, an international oil and gas lawyer and a partner at the London-headquartered law firm HFW, says that the imports Egypt has already signed contracts for will only provide a partial buffer to the new higher price environment.

    “While having existing deals in place is likely to help to mitigate Egypt’s exposure to the recent surge in LNG prices, it is unlikely that these deals will cover all of the country’s gas demand.

    “Because of this, Egypt is likely to need to buy volumes on the spot market, where it will face much higher payments.”

    Exacerbating the need for increased LNG imports, on 28 February Israel shut down production from its offshore gas fields due to security concerns, cutting pipeline exports to Egypt.

    Prior to the fields being taken offline, Egypt was importing about 1.1 billion cubic feet a day (bcf/d) from the Tamar and Leviathan fields.

    On 4 March, addressing concerns about energy supplies in the country, Madbouly said that Egypt had just concluded “several contracts” to procure gas shipments at “preferential prices” in cooperation with a range of countries and international companies.

    However, he did not provide details about exact pricing of the deals.

    Qatar deal

    On top of the LNG deals Egypt has with trading houses, in January, Egypt signed a memorandum of understanding (MoU) with Qatar related to 2026 LNG imports.

    The preliminary deal included plans for 24 LNG deliveries through the summer of this year, when energy demand typically peaks.

    Now, the shuttering of Qatar’s export terminals and the effective closure of the Strait of Hormuz is casting a shadow over the deal and there is increased uncertainty over whether these deliveries will be executed.

    Egyptian chemicals

    As well as impacting power generation in Egypt, the higher gas prices are also likely to cause problems for Egypt’s petrochemicals sector, where natural gas is used as a feed stock.

    In June last year, when Israel cut gas flows to Egypt after strikes on Iran, several major urea producers in Egypt were forced to stop production.

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    It is Egypt’s largest producer of nitrogen-based fertilisers and, in November last year, said that it was planning to invest $200m-$250m in 2026 and 2027, increasing its production capacity in the country.

    Jordan and Bahrain

    Jordan and Bahrain are also likely to be exposed to the surge in global LNG prices. They each respectively imported 665.7kt and 641.2kt of LNG between March 2025 and February 2026.

    Both countries have recently invested in their capacity to import LNG, and were anticipating ramping up imports prior to the latest spike in international prices.

    In April last year, Bahrain LNG Import Terminal (BLNG) received its first delivery of LNG since the terminal was officially commissioned in 2019. And, amid plans to boost imports to meet domestic demand, Spain-headquartered Noatum was awarded a five-year contract by state-owned Bapco Upstream in November to run marine services at the facility.

    In Jordan, a new floating LNG import terminal (FSRU) arrived at the country’s Aqaba port in August 2025.

    At the time, Sufian Batayneh, the general director of the country’s National Electric Power Company (Nepco), said that the terminal would benefit the region by providing LNG to operate Jordan’s power plants, as well as allowing the shipments of gas via pipeline to Egypt.

    Now, with the global price of LNG at multi-year highs, it seems possible that both Jordan and Bahrain will have to choose between paying significantly higher prices for imports or scaling back their plans for increased deliveries.

    Ongoing vulnerabilities

    The latest disruption to the LNG markets has highlighted vulnerabilities to the global LNG supply chain and has undermined the image of stability that was previously seen a key reason why many countries have been making it a central pillar of their energy strategies.

    Just how bad the economic damage will be for the Mena nations that are reliant on LNG imports will largely depend on how long it takes to bring Qatar’s export facilities back online and effectively reopen the Strait of Hormuz.

    If the current disruption to the global LNG market does persist for an extended period of time and significant damage is done to economies like Kuwait and Egypt, other countries in the region may well think twice before committing to the development of LNG import infrastructure as a central part of their energy strategy.

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    9 March 2026

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    It said that it declared force majeure “in light of the ongoing aggression by Iran against the State of Kuwait, including Iranian threats against safe passage of ships through the Strait of Hormuz”.

    Force majeure, a French term meaning “superior force”, is a clause included in many international commercial contracts. It allows companies to suspend contractual obligations when extraordinary events happen that are beyond their control.

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    6 March 2026

    Download the briefing

    In this executive briefing, Ed James and Colin Foreman from MEED outline the key developments in the US-Israel-Iran conflict and examine the potential economic, infrastructure and market impacts across the Middle East.

    Drawing on regional data and analysis, the briefing explores the drivers behind the escalation, the scale of attacks across GCC states, and the possible short- and long-term implications for energy markets, shipping, aviation and regional investment.

    For ongoing updates and verified reporting as events unfold, follow MEED’s mega thread here.

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