A Disrupted Gas Pipeline Won’t Send Gas Prices Flying Too High
First, Europe has slowly reduced its dependence on Russian gas over time. Ten years ago, Gazprom accounted for 50% of Europe’s natural gas supply; now, it accounts for less than 30%.
The two countries that stand likely to be most affected by Ukrainian gas pipeline disruption are Germany and the Netherlands because bad energy policies had already heightened prices in those markets.
Second, European inventories are looking good. They sat 49% full as of March 2, up from 37% a year ago according to Gas Infrastructure Europe.
This year’s mild winter – the third-warmest since 1981, according to MDA Information Systems LLC – left Europe with enough natural gas in storage to buffer Ukrainian flow disruption for about 45 days.
Third, Europe has worked to improve gas infrastructure such that it could use alternative routes if Ukraine’s gas pipeline is disrupted.
And finally, U.S. exports of LNG could mitigate shortages in Europe. The U.S. Department of Energy has approved six proposals to export LNG to countries without free trade agreements (FTAs).
Combined, the projects amount to 8.5 billion ft3/d of LNG – compared to 6 billion ft3/d that Russia exports to Europe via Ukrainian gas pipelines.
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