LNG could cover disruption in Russian gas flow via Ukraine: IHS
A disruption in Russian gas transit via Ukraine would be offset by additional LNG imports, IHS Markit argued in a new report released on February 7. But if all Russian pipeline exports to Europe were halted, LNG alone would not be enough to cover the shortfall and additional supply levers would be needed, the analytics firm said.
IHS noted that Russian supplies via Ukraine already fell to an historic low in January of 50mn m3/d, and while flow has recovered this month, it remains at half the level in 2015-2020.
“Europe is already experiencing a ‘quasi-curtailment’ of Russia gas flows,” IHS chief strategist for global gas, Michael Stoppard, commented. “The result is a European gas import picture that is starkly different from a year ago. One where LNG imports have ramped up to fill the gap.”
LNG would have to be diverted from other markets, however, causing prices to spike.
"While gas supply is sufficient to meet most market needs through the end of the winter heating season, high prices are already leading to closures of some industry and furloughing of workers in Europe," IHS's vice president for global gas, Shankari Srinivasan, added.
In the highly unlikely event of a complete stoppage in Russian gas flow to Europe, the continent would need to draw from its storage facilities at a faster rate and bring back extra coal and nuclear power capacity to cover the energy deficit.
“Low storage inventories have been a key element in keeping gas prices at elevated levels,” Stoppard said. “Running down storage further this winter would leave a huge mountain to climb to restock before the start of next winter.”