A steady Russia-Ukraine peace settlement may result in years of U.S. LNG underutilization and delays on U.S. LNG Last Funding Selections.
That’s what Wooden Mackenzie stated in a launch despatched to Rigzone by the Wooden Mackenzie workforce on Tuesday, which highlighted a brand new report from the corporate’s gasoline and LNG workforce that “outlines three peace settlement situations and explores their potential penalties by way of sanctions and the implications on commerce flows and costs”.
Certainly one of these situations is outlined within the launch as “no fast peace”.
- Advertisement -
“A failure to achieve any settlement can’t be dominated out and would leads to ‘stronger for longer’ gasoline costs as even much less Russian provide involves market,” Wooden Mackenzie stated within the launch.
“A continuation of the conflict may see the EU double down on sanctions, pushing even more durable to realize its ambition of independence from Russian power – banning LNG imports from the Yamal LNG venture and the 15 billion cubic meter a yr TurkStream pipeline,” it added.
“This state of affairs strengthens the necessity for extra LNG provide, with U.S. and Qatar capitalizing on extra funding alternatives,” it continued.
One other state of affairs is outlined within the launch as “a compelled peace”.
“Primarily based on the dynamics of negotiations at this early stage, a peace deal successfully compelled on Ukraine by the U.S. and Russia appears to be like the extra seemingly final result, permitting for less than a restricted return of Russian piped gasoline and LNG into the market,” Wooden Mackenzie famous within the launch.
“The U.S. can be easing sanctions on Russian LNG exports to facilitate a deal, however a possible EU ban on Arctic LNG-2 would restrict winter exports and curbs annual output at six million tons every year,” it added.
“In the meantime, the EU is unlikely to need… extra publicity to Russian pipeline gasoline, though some further flows into Hungary and Slovakia by way of Ukraine is likely to be the worth of maintaining the bloc’s Moscow leaning members from vetoing on extension of EU sanctions on Russia,” it continued.
Wooden Mackenzie said within the launch that this restricted return of Russian gasoline and LNG helps the market rebalance extra shortly, paving the way in which for decrease costs.
“Some U.S. LNG tasks in line for FID may face delay, however the total affect on new LNG investments might be modest,” it highlighted.
Wooden Mackenzie described one other state of affairs within the launch as “a steady peace”.
“A state of affairs the place all events signal as much as a complete and mutually acceptable peace settlement would open the door to materials volumes of Russian gasoline into Europe,” Wooden Mackenzie stated within the launch.
On this state of affairs, Europe might be seeking to accommodate extra Russian pipeline imports, by as much as 50 billion cubic meters a yr, Wooden Mackenzie famous within the launch. In the meantime, the lifting of U.S. sanctions on Russian LNG raises exports to 12 million tons every year, the corporate added.
“Because of this, European (TTF) gasoline costs would collapse properly beneath the $8-9 per million British thermal models that we already anticipate in 2028/29, resulting in years of U.S. LNG capability underutilization and delays to a number of anticipated LNG FIDs,” Wooden Mackenzie said within the launch.
“As a knock on to this, Henry Hub costs within the U.S. soften in flip as a consequence of decrease than anticipated LNG exports, supporting extra gasoline into home energy era and serving to decrease costs for U.S. shoppers,” it famous.
“However with a mean of 25 million tons every year of capability prone to underutilization over the subsequent 5 years, U.S. LNG can be the collateral injury,” it continued.
Within the launch, Massimo Di-Odoardo, Vice President of Gasoline and LNG Analysis at Wooden Mackenzie, stated power can be a key a part of the negotiation agenda of any peace deal.
“Elimination of U.S. sanctions on its LNG tasks would be the very least of Russian calls for because it appears to be like to reaffirm its place as a world LNG participant,” Di-Odoardo added.
“The EU holds the keys for a possible return of Russian gasoline to Europe, which means a complete and mutually acceptable peace settlement is a pre-condition for any significant return of Russian pipeline gasoline,” it continued.
Di-Odoardo went on to warn within the launch that the end result of ongoing negotiations for a peace settlement between Russia and Ukraine stays extremely unsure.
“All situations are attainable, together with potential combos of them, nonetheless, current improvement[s] counsel a peace settlement the place the U.S. and EU take totally different approaches to lifting sanctions, seems extra seemingly,” Di-Odoardo added.
Rigzone has contacted the White Home, the U.S. Division of Vitality, the Division of Info and Press of the Russian Ministry of International Affairs, the Press Workplace of the Ministry of International Affairs of Ukraine, the European Fee Chief Spokesperson, the American Petroleum Institute, and the State of Qatar’s Authorities Communications Workplace for touch upon Wooden Mackenzie’s launch.
On the time of writing, not one of the above have responded to Rigzone.
In a breaking information market replace despatched to Rigzone on March 12, Rystad Vitality’s Head of Geopolitical Evaluation, Jorge Leon, stated the power market implications of a Ukraine-Russia ceasefire might be enormous.
“A everlasting ceasefire between Russia and Ukraine would have wide-ranging and sweeping implications for international power markets,” Leon stated in that replace.
Rigzone beforehand contacted the White Home, the Division of Info and Press of the Russian Ministry of International Affairs, the Press Workplace of the Ministry of International Affairs of Ukraine, and the European Fee Chief Spokesperson for touch upon Leon’s assertion. Not one of the above responded to Rigzone.
To contact the creator, e-mail andreas.exarheas@rigzone.com
