Shale Gas Trailblazers Will Benefit From Russo-Ukrainian Rift
We believe that one of the consequences of the Russo-Ukrainian crisis will be a renewed focus on European energy security, which in turn may provide momentum for more intensive exploration of indigenous resources, specifically unconventional. We expect this to be especially so on the Eastern European frontier, where markets are particularly dependent on, or feel vulnerable to, Russian energy supplies. While accelerating US LNG supplies to Europe is one prospect mooted to enhance diversification of supplies, we believe the game-changer could take place a lot closer to home; in the shale gas space. At the forefront to benefit will be independent oil and gas explorers that have been spearheading exploration in Europe such as San Leon Energy, BNK Petroleum, and TransAtlantic Petroleum.
It should be noted that Russia has made no comments suggesting it may be looking to disrupt supplies to Ukraine -which would translate into supply disruptions further downstream in Europe- and it would be counter-productive for Russia to also use this lever and exacerbate mistrust with its European customers. Nonetheless, Ukraine's debts to Russia for gas purchased are mounting, the price Gazprom charges will go up by US$100 to US$368/thousand m3 from April, and it would be within Russia's rights to restrict supplies until its debts are settled or negotiated.
European diversification of energy supplies has advanced in recent years and the latest available data show that Russian gas made up 34% of total European gas supplies in 2012 compared to 38% in 2006 (at the time of the first Russo-Ukrainian gas dispute).
|Increasing Diversification Of Supplies|
|Russian - European Gas Trade Data|