Page 4 - GLNG Week 04 2022

GLNG COMMENTARY GLNG

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

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

Ukrainian, US and
NATO soldiers carrying
out exercises
Source: AFP

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