BERLIN: With Ukraine’s gas arrears, which as of the end of April have exceeded $3 billion, the risk of a cut off in June are highly likely, according to IHS Inc. (NYSE: IHS), the leading global source of critical information and insight.
The ongoing crisis in Ukraine, which has generated much concern about the implications for the European gas supply, will be among the key topics to be discussed at the IHS Berlin Forum, hosted May 12-14.
Thane Gustafson, senior director and advisor, Russian and Caspian Energy at IHS Energy will address the Ukraine crisis and its impact on the European gas market during the session “Russia and European Gas in the Eye of the Ukrainian Storm” on 12 May at the IHS Forum in Berlin.
“A last-minute deal is possible, but the deteriorating political environment in Ukraine is making this deal more difficult,” Shankari Srinivasan, IHS Energy vice president for power, gas, coal and renewables, EMEA and Asia Pacific, said.
“The impact of a temporary cutoff would be felt in Europe, as some gas bound for Europe would inevitably be diverted to meet Ukrainian demands. However, high storage levels put Europe in a good position to manage any reduction in flows. The more significant impact will be to focus the minds of European policymakers regarding long-term gas strategy toward Russian supply and Ukrainian transit,” she said.
According to Thane Gustafson of IHS, while Russian gas flowing through Ukraine still accounts for about 50 percent of total Russian deliveries, these volumes have been declining, both in absolute terms and as a percentage of total Russian exports to Europe. According to Gustafson, “Russia will remain a major source of gas supply for Europe, but under current circumstances, Russia is increasing its attention to the key Asian energy markets—Japan and China—to reduce its own heavy dependence on Europe as a market for its gas. This will certainly be a major subject of Putin’s visit to China later this month. However, it will be years before this shift translates into major changes in gas flows,” he said.
The analysis presented at the IHS Berlin Forum will address these questions in more detail, while also considering the regional characteristics of Ukrainian gas demand, the potential for expansion of imported liquid natural gas (LNG) in the European gas market, and the future of EU regulatory policy toward Gazprom.