Page 4 - FSUOGM Week 05 2022

FSUOGM COMMENTARY FSUOGM

Ukraine crisis prompts

LNG questions

The Ukraine crisis has prompted questions over how the LNG market would

respond to an escalation and what the impact would be

UKRAINE THE standoff between Russia and the West over under discussion illustrates that this scenario is
Ukraine is leading to growing speculation over at least being considered.
WHAT: the possibility – however unlikely – that Russian
Questions are being gas deliveries to Europe could be affected if the Tensions
raised over the impact of situation escalates. This has significant implica- Tensions have been growing over Ukraine
LNG volumes potentially tions for the LNG industry, and questions are in recent weeks, with Russia having amassed
being diverted to Europe. increasingly being asked about the possibility around 100,000 troops on the Ukrainian border,
of diverting additional LNG volumes to Europe leading to fears that a war could imminent.
WHY: and how this would affect global markets. Russia has denied that it intends to invade
There are fears that an This comes as Russian gas pipeline flows Ukraine, and has said it is prepared to continue
escalation of the Ukraine to Europe remain low, with the Yamal-Europe talks with the US over the European security sit-
crisis could disrupt pipeline flowing in reverse mode – away from uation. However, it has also indicated that such
Russian gas supplies to Germany – for the 38th consecutive day as of talks stand to achieve little after the US and Nato
Europe and alternative January 28. This has been attributed in part to rejected Moscow’s demand for a veto on Ukraine
supplies could be market dynamics, with buyers preferring to ever joining the military alliance.
needed. withdraw gas from storage to making more Against this backdrop, some players have
expensive purchases on the spot market in the begun to explore contingency plans for supply-
WHAT NEXT: current price environment. But at the same time, ing gas to Europe in the event that Russian sup-
A complete curtailment Moscow has been accused of deliberately limit- plies are cut off. In mid-January, it emerged that
of Russian gas flows to ing exports to Europe in a bid to exacerbate the the US government had held talks with several
Europe is considered continent’s gas supply issues for political ends. international energy companies about the pos-
unlikely, but the Analysts currently do not believe that Russian sibility of supplying gas to Europe.
potential implications gas supplies to Europe will stop altogether, argu- Citing sources familiar with the matter, Reu-
are increasingly being ing that it would be in neither side’s interest to ters reported on January 15 that the US Depart-
examined. bring about such a situation even if the Ukraine ment of State’s (DoS) discussions were being
crisis escalates. However, the fact that potential led by senior adviser for energy security Amos
impacts on the LNG market are increasingly Hochstein.

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