RUSSIAN GAS KEY
Europe could take advantage of global LNG dynamics, but much of the evolution of the European LNG market depends on Gazprom's decisions in the short to medium term, The Oxford Institute for Energy Studies wrote in a note published on Monday.
'Gazprom is occupied on many fronts in both political and commercial spheres. At some point however the need to adopt a more market-oriented strategy is likely to rise on its list of priorities. While the timing of this is at present uncertain, the conclusions of this paper would strongly suggest that this is a development that players in the wider LNG-connected global system should be closely monitoring' Howard Rogers wrote.
According to the analysis, the LNG contract price levels have been pushed down 'to levels unimaginable just two years ago.' Rogers explained that the changes are due to warmer than normal winters in 2013 and 2014, slowing Asian LNG demand growth through 2014, and collapse of the oil price in late 2014. The factos are expected to slow developments down.
'With project economics challenged and cashflows crimped, investors in new gas supply projects, especially LNG, will inevitably hold back, cut costs and await a more positive market outlook.'
Europe will be a passive recipient of excess supply, which could offset declining domestic production. In the longer term, Russia will be the major player.
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