Quantifying the economic value of Russian gas in Europe in the aftermath of the 2022 war in Ukraine

Chi Kong Chyong and James Henderson

Energy, 2024, vol. 292, issue C

Abstract: This paper examines Russian gas export scenarios to Europe, considering infrastructure, long-term contracts (LTC), and the new geopolitical landscape in Europe. Short-term expectations preclude export growth, while Ukraine transit risks stem from military actions, sanctions, or termination of the transit contract. Export volume may recover in a benign post-conflict resolution, though not to pre-war levels. Available export infrastructure options include the Ukraine transit and the TurkStream pipeline, with a combined capacity of 75 billion cubic meters per annum (bcma), about 50% of Russia's exports in 2021. Gazprom's LTC position will also dictate possible export volume to Europe. Pre-Ukraine war, Gazprom held 135bcma of LTCs with EU buyers. Currently, only 25bcma is active, with the rest terminated or under legal review. Of the remaining LTC, 12bcma faces risk if the Ukraine transit ends in 2025. Considering these issues, we model baseline and counterfactual scenarios with flows from Russia from 0 to 75bcma. Results suggest gas price differences are prominent until 2026 due to a tight global gas market. Beyond 2026, LNG expansion and Europe's decarbonisation commitments lessen the price impact, making Russian gas economically irrelevant. In the context of the war in Ukraine, the divisive issue of Russian gas becomes economically insignificant by mid-decade.

Keywords: Ukraine war; Gas security of supply; European gas market; LNG; Gazprom; Russia; Global gas market model; Long-term contracts; Nord stream; Yamal-europe; TurkStream (search for similar items in EconPapers)
JEL-codes: C61 Q37 Q41 Q47 Q48 (search for similar items in EconPapers)
Date: 2024
References: View references in EconPapers View complete reference list from CitEc
Citations: View citations in EconPapers (1)

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Persistent link: https://EconPapers.repec.org/RePEc:eee:energy:v:292:y:2024:i:c:s0360544224003761

DOI: 10.1016/j.energy.2024.130604

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