Establishing Energy Security

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The convergence of energy security and the climate agenda is likely to be a focal point at COP27.

The Russia-Ukraine conflict has caused severe energy supply disruption in the EU and forced a near-term policy divergence between energy security and the climate agenda.

Amid historical inflationary pressures and higher fuel and food prices — driven in part by the conflict in Ukraine — governments face trade-offs between immediate energy security priorities and the longer-term energy transition agenda. The imperative to find immediate alternatives to Russian gas imports has prompted a temporary suspension or reversal of several key EU climate objectives, including the planned phase-out of coal, threatening the EU's global leadership on climate policy.

This problem is compounded by EU member states scrambling to restock gas reserves before winter by bidding for LNG, pricing out developing countries, such as Bangladesh, India, and Pakistan, and causing them to revert to or increase coal- and oil-based generation.

Platts Market Data – Energy Transition provides access to the full breadth and depth of our energy transition market data, including contract price assessments.

Following the UN Climate Conference, COP26, in Glasgow in 2021 and the subsequent COP27 event in Egypt this year, major Middle East E&P companies are performing a balancing act of producing sustainable low-carbon intensive energy, amid accelerated momentum towards net-zero emissions.

Operators, however, are at the same time responding to a surge in demand for a secure and affordable energy source, as well as trying to fill the gap in the supply disruption, triggered by the current and ongoing conflict between Russia and Ukraine.

Hundreds of millions of people in Asia were lifted out of poverty in recent decades due in no small part to cheap and secure energy. Today, however, Asia's energy security faces a barrage of challenges.

The relentless buying spree of China's independent refiners for attractively priced Russian crudes is finally showing signs of slowing in November as importers pause for breath and wait for developments ahead of the imposition of EU sanctions, a trend that could potentially ease loading volumes for December and January.

Russian crude imports by independent refiners rose 3.9% month on month to 2.49 million mt in October and were the highest since January, but some major suppliers of Russian ESPO crudes have since started to suspend business because of the looming sanctions, market sources said.

Only two cargoes for December loading were heard to have traded in the past two weeks, compared with 24 cargoes imported in October.

Feedstock Import Trend of China’s Independent Refiners So Far In 2022

Global energy markets have been rocked by the Russia-Ukraine conflict this year. Amid the loss of the Nord Stream gas pipeline and sanctions on Russia, Europe faces an energy crisis marked by high prices and low supply, according to S&P Global Commodity Insights.

Germany is currently in a "comfortable" position regarding its gas supply security, but demand reduction efforts are still needed to ensure there are no gas shortages this winter, the regulator Bundesnetzagentur said Oct. 20.

The regulator presented four scenarios for the upcoming winter, which differ depending on the level of imports and winter weather-related demand projections in Germany and its neighbors.

Northwest European LNG Project Landscape