Russia Moves In On European Gas Markets As Oil Prices Crash

24/03/2020 10:15 Natural Gas

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Russia sees a silver lining in the oil price collapse, it now believes that the oil price war will help it win the war for natural gas market share in Europe.   Russia’s gas giant Gazprom, the single largest supplier of natural gas to Europe, has watched with apprehension the growing volumes of liquefied natural gas (LNG) from the United States that have arrived on European shores over the past two years.

However, the coronavirus pandemic and the crash in oil prices—while negative for all gas sellers around the world—are likely to hit LNG exporters more than it would hurt Gazprom, Russian energy analyst Alexander Sobko argues in an article in Russia’s state news agency RIA Novosti.

 

The “oil price collapse will not drag Russian gas down”, Sobko argues, saying that the majority of long-term LNG contracts, especially older ones, are indexed to oil prices, compared to 32 percent of Gazprom’s long-term contracts that are tied to oil prices.  

 

Crashing oil prices are set to lower the revenues and profits of LNG exporters whose contracts are indexed to the price of oil. The LNG glut amid depressed demand and economic slowdown (and outright recession in many mature markets) is likely to keep spot LNG prices lower for longer, eating into LNG producers’ profits and potentially forcing them to defer final investment decisions on new LNG liquefaction and export projects.

 

Source: https://oilprice.com

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