Dr. Sadad Al Husseini, the former executive vice president of Saudi Aramco and founder of Husseini Energy, a Saudi Arabian energy company, was on CNBC Monday commenting about natural gas supply and demand and the effect of sanctions on Russia and the global economy.
What Happened: During the interview, Husseini said that Russia accounted for 10% of gas production in the world, totaling 60 billion cubic feet of gas per year, and European nations account for 14 billion cubic feet of gas. He added the U.S. or OPEC would not be able to fill the liquid natural gas capacity needed for Europe.
Husseini noted if the Ukraine war is left unresolved, then there could be a cease-fire or an embargo on energy shipments that could last years, as the European Union does not have the resources to supply its energy needs.
Also, neither side is benefiting from the sanctions on Russian gas, although Russia can sell to China, India and Japan, while Europe does not have alternative energy sources, Husseini noted.
The Organization for Economic Cooperation and Development is expecting another embargo on Russian oil exports by land and sea on Dec. 5, 2022, as the embargo on Russian refined products already took place on Feb. 5, 2022.
Although Europe could extend sanctions, Russia would still need to be convinced to sell its energy exports back to Europe. This could lead to a painful cease-fire in Ukraine and could eventually lead to sanctions being lifted on Russian gas for Europe, Husseini commented.
Husseini also said this could send the European economy down a rough patch that will take years to recover from, while Russia's economy could bounce back much sooner as it is doing well with its energy exports.
As Russia’s Gazprom has reduced gas deliveries by 20% of capacity, the U.K. has stepped up its liquid natural gas production by 26% in the first half of 2022, per Business Insider.
According to Reuters, countries such as Germany have secured floating liquid natural gas terminals to help store gas for the winter months to become less reliant on Russian gas.
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ICE Dutch TTF Natural Gas Futures for Sept. 22 is down 17.14% to $281.06 megawatt per hour, from its open of $320 megawatt per hour.
Final Say: As a scorching summer blanketed Europe with record-breaking temperatures and continued sanctions on Russian gas sent futures to record highs, the European Union will have to act fast to secure sufficient gas supplies for the winter, or else there will be more pain to come for the global economy.
Photo: Geza Kurka Photo Video via Shutterstock
