Europe facing 'necessity' to ensure energy supply despite Ukraine conflict, LNG insufficient: CEOs

European governments are obliged to ensure security of energy supply in the face of the escalating conflict in Ukraine, with LNG import capacity insufficient to make up for Russian gas in the event pipeline supplies are disrupted, TotalEnergies' CEO Patrick Pouyanne said Feb. 24.

In a series of comments, Pouyanne said he did not expect Russia to cut gas supplies to Europe or use gas as a "weapon," but added that Europe faced potentially increasing its reliance on coal in the event the conflict in Ukraine spilled into the energy sphere.

Separately, Andy Brown, CEO of Portuguese energy company Galp and a former upstream director at Shell, echoed Pouyanne's warnings, saying LNG import capacity was insufficient to meet Europe's gas needs.

Addressing the International Energy Week conference, Pouyanne said he saw no impact from the conflict in Ukraine on his company's Russian operations, which center on the company's major investments in gas and LNG production in the far north of the country -- from where LNG exports are directed to China.

But he noted that Russia meets around 40% of European gas demand, a part of which transits through Ukraine. "I anticipate for Europe in particular the necessity to ensure the security of supply," he said.

"The events which are unfortunately happening today will remind many people, particularly in Europe, that security of supply is just a fundamental topic on which governments are expected by customers" to ensure "reliability," Pouyanne said, adding that he was "convinced" Russia does "not want to use this gas as a weapon in that dispute, that war."

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While TotalEnergies is one of the largest exporters of US LNG supply, US exports predominantly headed to China last year, and diverting them to Europe would require the continent to beat China on price, Pouyanne said.

"If there is a $2 [/MMBtu] higher price in China than in Europe, it goes to China and if there is $2 less, it comes to Europe, that is how it works," Pouyanne told a French industry event in comments relayed by his office.

In addition, there is an import capacity issue, he noted, saying: "Europe is lacking some regasification terminals today."

"It takes two to three years to build a terminal," he said, pointing to Germany's lack of any LNG import terminals.

"If the 40% of Russian gas disappears, then I wouldn't know what to do," he said.

Speaking at the same London event as Pouyanne, Galp CEO Brown echoed the point about Europe's dependence on Russia. He said Europe had gone some way to weaning itself off Russian supplies, but said LNG "is not going to fill the gap if that supply is interrupted."

Pouyanne went on to say that the French major would pay close attention to and comply with sanctions ensuing from the conflict, adding that the company was not dependent on any one country.

Referring to the company's Russian assets, which include LNG export facilities on the Yamal Peninsula, he said: "I don't see any impact. Our operations are very far from the theater of the war which seems to be declared today."

North Sea role

Pouyanne stressed the importance of the North Sea in underpinning European energy supply, including oil and gas, but also the UK's role in pioneering wind power. "More than ever the production of the North Sea and gas production of the North Sea is necessary for providing gas to Europe," he said.

"Scotland and the UK is really a land where all strategies to become a multi-energy company can be deployed, leveraging the skills of the UK industry," he said. "The UK has deployed a very aggressive strategy and policy of promoting offshore wind. This is the No. 1 country on the planet" for wind power.

Asked whether TotalEnergies should take a stance on Ukraine on human rights grounds, Pouyanne cited its recent withdrawal from Myanmar on human rights grounds, saying: "We recently took a stance on Myanmar. People criticized us -- Why didn't you do it immediately? In life you need to observe, you need to take time to look exactly what will happen. Today I think it's premature to make this type of conclusion," Pouyanne said.

"We are a large company. Russia is important of course for our business, but not a single country is so important for us that we can't manage... It's $1.5 billion of cash flow for Total out of more than $30 billion. We'll manage the situation. I hope this war will end quickly and diplomacy will come back."