The Russian invasion and subsequent imposition of sanctions in Ukraine.
Global sanctions have been reimposed by a variety of governments.
Geopolitical compass has immediate impact on oil, gas and other resources
Markets and investments The war on terror is ongoing and full.
While it will take years for the implications to become apparent, there are some early results.
Already, the above-ground risks are crystallizing.
Market shifts and price dynamics can cause immediate costs.
benefits
Russia’s global importance is as an energy producer. Europe is also affected by Russia’s.
A complete recalibration of oil & gas is necessary to make the market its main one.
The key non-military component of this region is the balance between supply and demand.
The global response. Russia has not been able to impose any sanctions.
It is a way to hinder general oil and gas trading and shipping, and its oil
Despite restrictions, oil and gas companies can still make investments overseas.
Finance. Western companies that plan to exit or halt operations have announced their intentions.
Only a small proportion of the total Russian investment is made in Russia.
The country’s oil and natural gas production will be limited.
Short-term impact on Russian production
In this context, the Asia Pacific region, headed by China, is
Emerging as an important, but not complete, offset
Expected cuts in demand of Russian production All regions will
Increased prices and slower growth are likely to have an effect on your bottom line.
Economic activity and demand will be affected by rival producer states.
Europe offers many opportunities for production and export growth.
It rebalances its energy sourcing.
Nets will benefit from near-term high oil and gas prices.
exporters, including Russia. Major beneficiaries include Angola,
Kuwait and Iraq are countries in which net oil exports will be a percent of the GDP.
If Brent averages USD106/barrel, the rise could be well above 50%
In 2022. However, rising net importer costs will only make matters worse
Existing inflationary trends that could lead to civil instability
As is the case, electoral shifts and threats to regime change
It is happening in South Asia.
Both current and potential producers profit from the search
For new opportunities
Opportunities will be created by rising prices and new demand sources
For producer states with limited resource availability, project economics is an option
Infrastructure availability and investor support co-emerge with
Support from the government
Access to existing infrastructure is available for gas projects.
Particularly strong position to be competitive, offering new opportunities
Especially to East Mediterranean and African suppliers. In some
This may be a way for producer states to revive their oil and gas reserves.
Licenses and rethinking transition strategies Fiscal changes
Given the sluggish economy, terms are likely to take longer to materialize.
Evolution of government policy, uncertain energy impact
Transition and producer government perceptions of changes in
Attractive customers will be attracted by the supply and price dynamic.
investment.
Higher prices mean new market opportunities and greater profitability.
Realistic assessment of the role of fossil fuels during energy transition
How the host governments will respond to the challenges presented by the current
The maturity and scale of the plants will impact their environment.
Resources, their economic worth and their structural attributes
Dependence on hydrocarbons. It is important to note that each country has its own specific requirements.
differences between producer peer groups are worth noting:
Diversified producers like Brazil, Canada,
Mexico, Norway and the US will likely have to balance.
Priorities could shift to energy security, which may lead to shifting attitudes about priorities
Even if you need longer-term energy, domestic hydrocarbon production is possible
The transition goals are still in effect.
Net importersLike China, Egypt, India and
Tunisia will likely double down on its existing strategies to sustain.
Increase production.
Frontier / early stage producersLike Cyprus,
Mozambique, Namibia, and Morocco are all countries that have no exports.
Infrastructure might now have the potential to accelerate
monetisation.
Oil dependentsIn most cases, current or former
Major producers such as Angola, Iraq and Nigeria, as well Oman, may be included.
You may have a longer window of opportunity.
Monetise their remaining reserves and leverage infrastructure.
Diversification is a good investment if you have the ability to plan.
Execute your plans.
Wealthy petrostates like Qatar, Saudi Arabia,
The UAE and UAE are likely to keep existing and/or accelerate it
Strategies to sustain or grow output in an effort at monetisation
Remaining resources in advance a global energy transition
Each country’s specific responses will differ, and are shaped in large parts by
above-ground factors. Particular relevance: Above-ground risk
The following are the current circumstances:
Geopolitical RiskEspecially in Russia’s immediate
neighbourhood.
Real per capita GDP GrowthAs production and
Oil and gas exports fluctuate, and crude oil prices rise.
Natural gas starts to impact consumer spending.
Primary Fiscal Balance Transfer
Risquesreflects some of those same factors that can affect
Overall economic activity, but with new dimensions added by sanctions
Learn more about the options for foreign-exchange and capital
controls.
Ministerial/Policy VolatilityAs some
Although constrained, governments reprioritise energy security.
Cases by the level Civil Society RiskAs
Inflationary pressures rise.
Other affected factors include Export Risk,
Recent and forthcoming changes in export policies
infrastructure.
Energy transition efforts temper by renewed energy
Security concerns
The Ukraine invasion will also have repercussions for energy
Transition, primarily in Europe where a renewed energy focus is essential
Security is a key reason to ensure additional fossil fuels are secure
Supplies in short order Near-term measures are recommended, as mentioned above.
Probably, this will include a higher level of investment in LNG regasification
also to increase the production and investment in biomethane.
Renewable hydrogen and to front-load solar and wind. These are just a few of the many benefits.
There are indications that some countries are beginning to recognize that
The nuclear industry will have to play a larger role.
The United States administration is expected to double down.
on efforts to accelerate the energy transformation. The drive to
Some short-term pains could be eased by supplying additional gas to Europe.
There are restrictions, such as those around new pipelines or leasing.
Climate will be the priority.
In the rest the world, security concerns will rise
For countries that want to secure upstream, this will be a positive sign
Investments to combat energy poverty and ease financing
However, overall, efforts to reduce hydrocarbon usage are successful.
This will be combined with high prices and supply chain problems.
Limiting demand growth will only increase the complexity of the transition
Long-term uncertainties
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To read the report, Oil & Gas Risk Quarterly: Reverberations
Ukraine Crisis – The above-ground risk implications of the
Global upstream
sign up for complimentary access to the Upstream Oil & Gas
Hub.
This article was published by S&P Global Commodity Insights and not by S&P Global Ratings, which is a separately managed division of S&P Global.
