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With the disruption to Russian pipeline flows leaving a ‘massive supply gap’ in European gas markets, Europe has had to look for a new major supplier to fill the shortfall – and ‘destination-flexible US LNG has answered the call’, according to a new report from Wood Mackenzie.

In a statement sent to Bunkerspot on Tuesday (6 December), the consultancy said that – with Russia only exporting 25 billion cubic metres (cbm) of gas to the European Union (EU), down from 140 cbm – the ‘abundance of low-cost gas reserves, the relatively short time to bring new volume to market and its competitive commercial structure continue to make US LNG attractive’.

Kristy Kramer, Vice President, Gas & LNG Research at WoodMac, commented: ‘We now expect two-thirds of all US LNG cargoes to land in Europe this year. Regasification capacity is currently the major impediment to even more US LNG exports to Europe.’

The main conclusion of the new report, entitled The Silver Linings Playbook, is that: ‘Spiralling energy costs and the impact of Russia’s war with Ukraine have had a damaging impact on the global economy, but may also hasten the changes required to transform the way we power the planet.’

The report found that policymakers are ‘finally acknowledging that a diverse range of low-carbon technologies beyond variable renewables is required to achieve deep decarbonisation while maintaining a secure energy supply’.

But it also said that there has been a ‘lightbulb moment’ in 2022 as investors are adopt ‘a more realistic attitude’ to investing in fossil fuels.

‘The current energy crisis has prompted investors to rethink finance for fossil fuels,’ the consultancy argued. ‘What has emerged is a more measured approach that reflects the real-world constraints on financial institutions and corporates in making long-term financing and capital allocation decisions.’

Kavita Jadhav Research Director, Corporate Research at WoodMac, explained: ‘The shift in approach reflects both the complexity and the necessity of securing an orderly energy transition. The past year has made abundantly clear that energy supply and demand need to move in sync for economic stability and minimal price volatility.’

The report also surveyed trends in the refining sector, predicting that refining margins – which have seen some record highs – will ‘return to historical norms’ over the next 12 to 18 months as major new refinery projects in the Middle East, Africa and Asia become fully operational.

Click here to access the Wood Mackenzie report, The Silver Linings Playbook.

Emma Fox, Senior Research Analyst, Refining and Oil Products at Wood Mackenzie, has contributed an article about impact of the European Union's sanctions on Russian crude oil in the December/January issue of the Bunkerspot magazine. Click here to access the digital edition.

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