A changing global energy map

In this interview with Mohammed al Maghrebi from Alghad TV, Dr Carole Nakhle, CEO of Crystol Energy, discusses the dynamics of energy markets amid the war in Ukraine.

Some of the discussion’s highlights:

1. Some believe that Russia has emerged a winner given the strength of its currency. Such a wrong perception overlooks the drivers behind the strength of the rubble (sanctions, capital control and oil and gas exports). In fact, its economy is expected to shrink by around 10% this year. Furthermore, its crude oil benchmark, Urals, is being traded at a big discount (-35$/bbl vs Brent).
2. The biggest losers from this crisis are the low-income countries which are facing a massive import bill, particularly of energy and food.
3. The trade of oil differs from that of natural gas as oil can be easily stored and shipped to customers around the globe. In gas, however, a relationship binds the supplier and customer through the construction of pipelines. Liquified Natural Gas (LNG) is helping in globalising gas markets but there is still a long way to go.
4. Europe has relied on Russian pipeline gas for its energy needs and Russia relied on Europe as its main gas market. In its Energy Strategy, Russia expected Europe to continue to be an important market even under the worst-case scenario.
5. The war in Ukraine will lead to a change in the global trade of energy. Russia will have to search for new customers for its fossil fuel exports, namely in Asia. Other players will play a bigger role in Europe to replace Russian gas.
6. The crisis has also shed light on a structural issue which is that climate goals cannot be achieved without energy security.