“That business, which took a half century to build, is not going back to Russia.”
The Europeans had already committed to ending the use of fossil fuels in 10 years or so. So no big deal for Russia.
“Europe has already signed long term contracts with new suppliers.”
Which ones, for how much, and when will they have additional LNG the export capacity on-line? Not Cutter, not Algeria, maybe US?
“Russia cannot physically move that gas to new customers for the next decade, if ever.”
Probably not, but look at a GLOBE - Russia is a big country, very big, they’ll do fine sending pipeline gas to China, and more of that is coming on-line, on a regular basis.
“Europe has already signed long term contracts with new suppliers.”
“Which ones, for how much, and when will they have additional LNG the export capacity on-line? Not Cutter, not Algeria, maybe US?”
Qatar, Algeria and US companies have all signed major new supply contracts with Europe since the war started. They are top ten Global producers, who have the largest capacity, and got the biggest contracts. The USA id the single biggest winner by volume. Azerbaijan and Egypt/Israel have also signed deals that are major increases for them, but smaller slices of the European Market. Norway and the Netherlands (large producers/exporters) have also been big winners from Russia’s former market share, but they are internal to Europe.
German Chancellor Scholz is in the Mid East this coming week, and is expected to sign the last of the major deals to permanently replace their Russian gas supplies. Germany is on track to start up three of the eight new LNG terminals they are getting before the end of this year (before the worst of Winter). Just the one at Willhelmshaven can handle 8% of Germany’s annual use. Other new LNG terminals around the coasts of Europe will also activate before year’s end - about 20 new trains before the end of next year.
The new Baltic Pipe from Norway to Poland starts flowing 10bcm per year to Poland next week, completely replacing what that Country (formerly heavily dependent on Russian supply) bought from Russia last year.
The import infrastructure is really the main constraint, because Europe can simply outbid other customers for the shiploads of LNG. They have been doing that on the spot market, which drove prices way up in the bidding war, when Europe was racing to fill their storage, and Russia was cutting supply early. Now that most of their new LNG supply to replace Russian supply is finally under contract, European purchasers have been buying a lot less on the spot market, and prices there have dropped in half over the last month.
When the sanctions were first imposed, Europe planned to reduce 2/3rds of its gas imports from Russia this year, but Russian cutoffs have accelerated that transition. It is now looking like 90% or more will be replaced this year - maybe all of it.
“they’ll do fine sending pipeline gas to China, and more of that is coming on-line, on a regular basis.”
There is no “regular basis” of increasing transport capacity. They can increase utilization of existing infrastructure up to 100% (nearing that now - about double last year’s shipments to China, which was then about 7% of Russian gas exports), but any new projects are many years away. The only new export capacity they had in development for the near term was one LNG terminal off the Nordstream pipeline near Saint Petersburg. That was accelerated and recently activated, but can only handle about 4% of the volume that used to go through Nordstream.
Last year, 85% of Russian gas exports went to Europe.
Net of European losses and Chinese gains, about 3/4 of Russia’s gas exports will be lost from the start of the war through now - the great bulk of that over the last three months. It is just not going to come back.
Last year, natural gas was about 1/4 of Russia’s GDP (including domestic use). Ripping that out suddenly inflicts further secondary and tertiary economic costs, like suppliers and support services to that industry, wages and the other businesses that were supported by gas industry workers as customers.
Oil was another 1/4 of Russia’s GDP last year, but unlike the stable long term gas business, oil has always been prone to boom and bust cycles, with a major bust cycle approaching fast.
This is a once in a century economic train wreck for Russia. They are more dependent on oil and gas (1/2 of GDP) than Saudi Arabia (1/3), and the rest of their economy has been devastated by sanctions. Agriculture is about the only thing not in near free fall.