With the Strait of Hormuz closed, European LNG prices have roughly doubled in days. The EU depends on imports for almost all the gas it burns—323 bcm consumed in 2024, just 33 bcm produced.

That gap raises the obvious question: why doesn’t Europe produce more of its own gas?

The potential for European gas production looks enormous on paper. According to a 2013 energy study by Germany’s Federal Institute for Geosciences and Natural Resources (BGR), Europe’s technically recoverable gas resources amount to 21 trillion cubic metres (tcm).

This volume would cover the EU’s entire gas demand for 65 years.

Several major oil and gas companies actively pursued gas exploration—particularly non-conventional gas—in Europe during the late 2000s and early 2010s. However, economics (alongside politics) was the major constraint. Domestic gas has rarely been cheap enough to justify drilling when imported supply was readily available.

According to the Institute of Energy Economics at the University of Cologne (EWI), the cost of extracting shale gas in Germany ranges between €25 and €42 per MWh. The Centre for European Economic Research (ZEW) estimates that fracking becomes economically viable once gas prices exceed €50 per MWh. That estimate dates from 2013, and inflation since then has likely pushed the threshold higher.

Prices at the Dutch TTF—the benchmark for landed LNG in Europe—have mostly fluctuated between €30 and €40 per MWh over the past two years, with brief periods near €45–50 and lows around €27–28. At those levels, gas exploration in Europe has been a weak business case.

However, energy security is a public good. The question, then, is whether public money is being spent on the wrong solution, or whether it could be used more effectively.

To answer that, it helps to look at the EU’s renewable subsidies, which do little to strengthen security at the margin. Natural gas is a vital feedstock for chemical processes, required for heating, and supplies baseload power when wind and solar generation are not sufficient to cover demand, which is the case during most of the year in Europe.

Between 2021 and 2023, renewable energy subsidies ranged between €61 billion and €83 billion per year.

Note that these figures cover only subsidies spent directly on installed capacity. Once grid expansion, storage, and frequency control are taken into account, it is reasonable to assume that total system costs will roughly double going forward.

For ease of calculation, let us ask what €100 billion of taxpayer money, used to bridge the price gap between market gas prices and economically viable fracking in Europe, would unlock. Given inflation, let us set that breakeven threshold at €70 per MWh.

If economically viable fracking requires a gas price of roughly €70 per MWh, and the market price at the Dutch TTF has hovered around €35 per MWh, the subsidy required is about €35 per MWh.

A budget of €100 billion deployed to bridge that gap would therefore underwrite roughly 2.9 billion MWh, or about 2,850 TWh, of gas production.

Converted into volumes, that corresponds to roughly 270 bcm of natural gas—close to an entire year of EU gas demand at current consumption levels—once capital has been deployed and learning effects have materialized.

As long as Europe leaves its own potential untapped, it will remain an energy vassal—dependent on whoever is the least problematic villain at the moment.

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