Ukraine's top energy official said a few days ago that no new agreement will be considered after the transit agreement expires. This also means that Europe's energy market will face a wave of shocks.

Ukraine cuts off Russian gas routes to the European Union

The impact of the Russian-Ukrainian conflict continues to ferment.

According to the latest news, Ukraine's highest-ranking energy official said that no commercial agreement to allow Russian gas to continue to transit through the country to Europe will be considered, and the existing transit agreement will expire at the end of the year.

After the Russian-Ukrainian conflict broke out in February 2022, Russia stopped supplying some pipelines to Europe, but some pipelines still pass through Ukraine.

On September 26, 2022, the Nord Stream gas pipeline exploded and spilled a large amount of natural gas. 3 of the 4 pipelines leaked. There are 4 leak points in total, located in the waters off Sweden and Denmark. This has also had a huge impact on Europe's energy market.

Industry insiders analyzed that before the conflict broke out, Russian gas giant Gazprom exported about 177 billion cubic meters of natural gas to major markets in Europe and Turkey every year through several pipelines, and the loss of Ukraine's transit routes would have no impact.

However, due to the forced closure of other routes, gas delivered through Ukrainian pipelines accounts for nearly 30% of Gazprom's exports. As one of the world's largest gas producers, Gazprom's supply stability is of great importance to the energy security of the European market.

What do you think of the future

After the Ukraine crisis began in 2022, Europe reduced gas imports from Russia, and the US became its main supplier.

In 2023, the US exported 91.2 million tons of LNG, surpassing Australia and Qatar to become the world's largest LNG exporter. The sharp increase in US LNG exports is also due to the increase in its LNG export capacity, the rise in international LNG prices, and the increase in global demand, particularly in Europe.

According to data from the International Energy Agency, EU countries and the UK were the main destinations for US LNG exports in the first half of 2023, accounting for 67% of total US exports, or 7.7 billion cubic feet (about 160,000 tons) per day. Strong LNG exports kept the average price of US Henry Hub gas futures at around $2.6 per million British thermal units.

On February 25, local time, Qatar's Minister of State for Energy Affairs, Saad Kaby, President and CEO of Qatar Energy, announced that Qatar's northern gas field will continue to expand production and is expected to increase liquefied natural gas (LNG) production by 16 million tons per year on top of existing production capacity.

Saad Kaby said that the new gas production expansion project is expected to be completed by 2030, when Qatar's annual production of liquefied natural gas will reach 142 million tons.

Although international gas prices are currently falling, in the long run, Qatar is still optimistic about the gas market, especially the European and Asian markets.

Looking ahead to 2024, the European geopolitical conflict will hardly see the dawn in the short term. The Red Sea crisis spillover from the Palestinian-Israeli conflict is intensifying, undercurrents are surging in traditional geopolitical sensitive regions such as the Korean Peninsula and Southeast Asia. Countries and organizations such as the United States, Russia, and the European Parliament will usher in general elections, which may further increase the uncertainty of international politics. Although the energy shortage has abated somewhat, the outlook for the world economy is getting bleaker under the impact of the anti-globalization wave.

The International Energy Agency also believes that global demand for natural gas will experience a “strong increase” in 2024 compared to 2023, mainly driven by low temperatures and falling prices. At the same time, the possibility of “new turbulence” in the market is not ruled out.

Winter temperatures in 2024 will be colder than the warm winter of 2023, increasing demand for household and commercial heating.