Europe would be hard pressed to replace Russian gas, Fitch Ratings says in a review.
"In the immediate aftermath, the region would suffer from gas shortages and high prices due to its limited ability to reduce demand, source alternative supplies and transport gas to the most affected countries. A surge in gas prices after a ban would probably also have knock-on effects on electricity, coal and oil prices," Fitch points out.
Industry would bear the brunt of supply shortages as household demand would be given priority. A lengthy ban on Russian gas is a low-probability, but high-impact scenario. Russia supplies around 27% of Europe's gas and, given the high cost a ban would impose on all sides, Fitch believes it would take a severe deterioration in the Ukraine crisis for it to happen.
A temporary disruption just affecting gas supplies via Ukraine is a more likely scenario, for which Europe is better prepared due to high reserves and the recent opening of a new pipeline from Russia to Germany.
In 2013, Russia supplied 145bcm of gas to Europe, which would have great difficulty in sourcing alternative supplies. Increased European gas production and North African piped gas could offset a small proportion of this. Tapping into the global LNG market would yield limited volumes as Europe's Russian gas demand equates to nearly half of the world's LNG production, which is already mostly tied to long-term supply contracts.
"AK&M", 23.04.2014 15:19