What if Russia Shuts Off Gas Exports to Europe?

In this note, we a nalyse the impact of a halt in Russia’s flows to Europe transited via Ukraine, which we consider the most likely “outage scenario” associated with ongoing regional tension. We are more likely to see a “price crisis” than a “volume crisis” with NW European gas stocks sufficient to accommodate losing 113 mcm/d of Ukrainian transit (the 2021 average level) , assuming five-year average withdrawals. However, in a worst-case scenario where an outage is imminent, stocks would be painfully tight by the end of the withdrawal season, exposing TTF to significant weather risks. The impact of lost Ukrainian transit will be dependent on the flexibility available in the global LNG market, the ability for Gazprom to re-route flows via Poland and finally, the timing of any outage, given the strong seasonality of European gas consumption. In all scenarios, TTF would be biased higher than our current 2022 forecast of € 71.25/MWh.