The world is heading for a “turbulent period”, with a tightening of supplies of liquefied natural gas and oil exacerbating a global energy crisis, the head of the shellBen van Beurden.
The giant’s CEO Petroleum and gas painted a grim picture of an energy market that will struggle to replace large volumes of Russian oil and gas that still flow into the Europe.
“Will there be a lot of new extra LNG supplies to fill the gap? I don’t think so,” Van Beurden said in Singapore on Wednesday.
The world faces a shortage of natural gas amid disruptions to the supply of Russia and strong demand for the fuel as economies recover from the coronavirus pandemic.
Moscow has cut gas supplies through a major pipeline to Europe amid rising war-related tensions in Ukraineand this has governments across the continent brace for a total supply shutdown.
“Idle capacity is very low and demand is still recovering,” said Van Beurden. “So with that, and also the uncertainties with the war in Ukraine and the sanctions that could come from it, there is a good chance that we are facing a turbulent period.”
Russia accounts for about a third of Europe’s natural gas imports through the Nord Stream pipeline, he said.
Europe could extract up to 50 billion cubic meters of additional gas a year from the controversial Groningen gas field in the Netherlands, but that would be a measure of last resort for the Dutch government, Van Beurden said.
Production from the field has been restricted for years because of earthquakes triggered by gas drilling.
The outlook for oil is not much better. Van Beurden says OPEC’s idle capacity was lower than most believed or expected, while demand reached pre-pandemic levels and will continue to rise for years to come.
This collides with a decline of about $1 trillion in investment in the fossil fuel industry over the past three years that would have happened under “normal circumstances”.
“We will face tight markets unless there is a very significant drop in demand,” he said.
When asked about the G7’s idea of imposing a price cap on Russian oil to cut Kremlin-related energy revenues that are used to finance the war in Ukraine, Van Beurden was skeptical: “You can already see all the flaws.” .
Such a system would only work if there was broad participation beyond Europe and the US, he said.
Otherwise, “you will just continue to see what is currently happening, which is Russian oil that is going to countries that can still buy Urals, for example,” he said in reference to Russia’s main export oil.
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