Ukraine crisis “could push gas users towards coal or renewables”

The Ukrainian political crisis could push natural gas users into the arms of coal or lead to “gas versus LNG” competition, analysts suggested today. Last week President Yanukovych fled capital […]

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By Vicky Ellis

The Ukrainian political crisis could push natural gas users into the arms of coal or lead to “gas versus LNG” competition, analysts suggested today.

Last week President Yanukovych fled capital Kiev for Moscow after violent clashes between police and thousands of protestors.

This morning Russian soldiers reportedly fired warning shots over the heads of Ukrainian troops in Crimea, the pro-Russian peninsula on the northern coast of the Black Sea.

While the stand off appeared to have eased today, heightened tensions saw gas prices for April delivery spike nearly 10% yesterday.

Andy Brogan, oil and gas expert at global consultancy EY told ELN in the medium and longer term, it has pushed users to look at alternatives for gas.

He said: “There’s an element of anticipating [the security of supply issue] by different pipes that are bypassing Ukraine but the other thing is that it’s definitely going to make people look for other supplies.”

Anybody buying gas in Europe will likely be looking at alternatives and this may lead to a “real risk of gas on gas competition”, he suggested: “The German utilities, French utilities even the Polish utilities. They can still all seek to increase the LNG part of their gas consumption. Whether that means they start building more terminals or can increase the size of terminals already there.”

There’s wider risk to the gas industry, added the analyst: “The other risk is that it moves more of the generation mix away into coal or renewables. Gas is already struggling because of the impact of shale in the US on coal prices.

The medium term impact I’d say is more around the… attractiveness of gas as a fuel. And from an industry perspective, that would be probably with us longer than the short term price volatility.”

At its basic level, it’s thrown a question mark over Russian supplies, he added: “We went through this in 2009, 2006 before that. Even if there’s absolutely no interruption whatsoever, what it’s done is remind people of the risk of piped gas associated with Russia.”