Page 32 - Russia OUTLOOK 2023

resort, during overproduction, oil can be stored in reserve storage facilities,
which can be built additionally, he admits.

EU ministers agreed on a gas price cap. Energy ministers of the European
Union member states on December 19 have reached a consensus on a cap
for natural gas prices, according to the spokesperson for the Czech Republic's
EU presidency, Dmitrij Černikov. Reuters reported, citing an official document,
that the new policy states that a cap on gas prices will be implemented at €180
per megawatt hour (MWh).

Previously the EU discussed the upper limit of the gas price cap at €220.
Several nations, including Europe's biggest economy, Germany, have opposed
the idea of any cap, saying it could make it harder to secure supplies.
However, Belgium, Italy, and Poland see it as a way to protect consumers and
the economy from the shock of high energy prices.

Under a compromise put forward by the Czech Republic, which holds the EU's
rotating presidency, the cap kicks in if prices exceed €180 per MWh for five
days on a month-ahead contract at the TTF hub in the Netherlands, reported
Reuters. At the same time, the TTF price, which serves as the European
benchmark, must be €35 higher than the reference price for liquefied gas,
based on numerous existing estimates of LNG prices, for the cap to work.

Russia will need to close a sizable portion of its gas-export infrastructure
as around 60% of its gas exports go west to the EU and UK. These cannot
easily be redirected quickly, with new pipelines to China and Asia needed at
least five years to build and more likely a decade as the offtake agreements
need to be put in place first, and that is a long, slow process.

Like sea-borne oil, Russia has some ability to redirect LNG exports away from

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