Tue. May 21st, 2024

Prof. ST Hsieh

Director, US-China Energy Industry Forum


[email protected]

February 22, 2022

Putin’s action against Ukraine today, may be expected by some, ushered the global energy market, especially natural gas, into a real tailspin. The Ukraine crisis has been on the global cross hair for months. Biden administration has been open and offered real time updates on war is imminent. However, “war” is not clearly defined, and diplomacy is the real end game. It is not just semantics,” war,” invasion”, “military action,” are often used simultaneously but each word means very differently, depends on who is the speaker and who is the listener. The same goes with “sanctions” vs “severe sanctions!”

Immediately after Putin’s move, global energy market prices skyrocketed, even though no energy demand has increased anywhere in the world. Further, no energy supply base has been affected by the Ukraine crisis. There is no pipeline has been damaged, except the Nord Stream II gas pipeline was “pronounced” dead by the US and Germany for the time being. In fact, it has never delivered a molecule of CH4 yet.

The crisis will not be over soon, the following reports present two different perspectives. The main message is that the Ukraine crisis affects global energy market stability. Further, there is no easy solution to fully re-supply natural gas to Europe if the crisis is not resolved soon. Just imagine, who pays the most for this energy crisis?


GT Voice: Ukraine crisis likely to disrupt global energy supplies

By Global Times Published: Feb 22, 2022 08:57 PM

With the outbreak of the Ukraine crisis, Europe seems to have never been closer to a self-made energy crunch which threatens its future.

The US and its Western allies condemned Russia’s latest move to recognize the two breakaway regions in eastern Ukraine as independent states while pledging to impose new sanctions on Moscow. 

Russia’s UN representative Vasily Nebenzya said during an emergency UN Security Council meeting held on Tuesday that Russia remains open to a diplomatic settlement to the Ukrainian issue, but the US and its allies have repeatedly played up the situation, warning that Western powers not to worsen the situation in Ukraine.

In a Tuesday phone call with US Secretary of State Antony Blinken, Chinese State Councilor and Foreign Minister Wang Yi said the evolution of the Ukraine issue so far is closely related to the delay in the effective implementation of the new Minsk agreement. China once again calls on all related parties to exercise restraint, ease the tense standoff and resolve differences through peaceful negotiation.

The latest development unsurprisingly sent jitters throug global financial markets, with a litany of international stock indexes plunging sharply and oil prices surging on potential energy supply disruption concerns. This is because if the Russia-Ukraine situation continues to escalate, it could cause a severe turmoil in global energy supplies, with European countries bearing the brunt of the shocks.

EU officials previously said that there is general agreement that economic sanctions would be ready within 48 hours of an “invasion”. While it remains unclear what the EU sanctions will contain, given Russia’s economic significance to Europe in terms of energy cooperation, there are loud voices calling for European sanctions to avoid disrupting important oil supplies from Russia. 

For instance, Italian Prime Minister Mario Draghi told reporters last week that any sanctions that may be imposed on Russia by the EU should not hit energy imports. His remarks, to a certain extent, underscore European countries’ dependence on Russia for supply of energy.

Therefore, any potential Western sanctioning on Russia’s energy exports is likely to be double-edged sword. Some may argue that US gas exports to Europe has been on the rise recently, which may become a potential source of energy supply to European countries, but even if the US can increase its production capacity to fill the supply gap, the high transportation costs of LNG from the US means that the EU’s energy costs will rise significantly.

Similarly, oil has also been facing considerable pressure lately. Once the situation worsens, it is inevitable for oil prices to go off the roof.

It is not just Russia and the EU that will be hit by the turmoil in global energy supplies caused by the geopolitical conflict. Once the global energy supply and demand pattern has to change, China, which relies heavily on oil and gas imports, could also feel the effect.

Historically speaking, military conflicts, especially those among major powers, often have a serious impact on oil supplies.

China should further strengthen economic and trade cooperation with Russia, Saudi Arabia and other oil exporting countries. China should also be prepared to ensure the security of its oil supplies. In the long run, the country needs to increase the use of green and renewable energies as much as possible to consistently support China’s economic growth.

Qatar says “almost impossible” to quickly replace Russian supplies to Europe

Maha El Dahan, Andrew Mills and Marwa Rashad

Tue, February 22, 2022, 3:28 AM

DOHA/LONDON (Reuters) – Neither Qatar nor any other single country has the capacity to replace Russian gas supplies to Europe with liquefied natural gas (LNG) in the event of disruption due to a conflict between Russia and Ukraine, Qatar’s energy minister said on Tuesday.

With most of Qatari volumes are locked into long-term contracts mostly to Asian buyers, the amount of divertable volumes that can be shipped to Europe is only 10-15%, Saad al-Kaabi added.

Kaabi’s comments renewed concerns over Europe’s security of gas supplies as tensions escalated between Russia and Ukraine on Tuesday after Moscow ordered troops into two breakaway regions in eastern Ukraine.

“Russia (provides) I think 30-40% of the supply to Europe. There is no single country that can replace that kind of volume, there isn’t the capacity to do that from LNG,” Kaabi told reporters at a gas conference in Doha.

“Most of the LNG are tied to long-term contracts and destinations that are very clear. So, to replace that sum of volume that quickly is almost impossible,” he said.

The United States and its European allies are set to announce fresh sanctions against Russia after President Vladimir Putin formally recognised the independence of the two regions in eastern Ukraine. The sanctions could affect the Russian flow of gas into Europe.

Germany on Tuesday halted the Nord Stream 2 Baltic Sea gas pipeline project, designed to double the flow of Russian gas direct to Germany. The move sent gas prices higher on Tuesday

Qatar and other countries such as Japan have recently been approached by the United States to reroute gas supplies to Europe in case conflict escalates.

Sources told Reuters that Qatari LNG exports have been lower over the past few days as two of its mega trains have been down, another factor that could limit the spare amount to be sent to Europe.

Japan said earlier this month it will divert some LNG cargoes to Europe after requests from the United States and the European Union.

However, the few cargoes that arrived to Europe were cargoes already scheduled under a joint venuture between Japan’s JERA and France’s EDF and there was no incremental added supply.

Currently facing a cold spell that has depleted LNG inventories, Japan is experiencing re-stocking demand and so it needs more LNG supply.

“We’ve not seen anything concrete happen to supply yet. That could obviously change, but clearly, Qatar and Japan will be limited in their ability to help with extra cargoes if Europe loses access to Russian gas,” said Robert Songer, LNG analyst at commodities intelligence firm ICIS.

(Reporting by Maha El Dahan and Andrew Mills in Doha, additional reporting by Isla Binnie in Madrid, writing by Marwa Rashad in London, Editing by Nina Chestney and Chizu Nomiyama)

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