The conflict between Ukraine and Russia could cause the global LNG market to tighten further if the crisis were to escalate and affect gas flows into Europe, but high gas storage inventories in the region should create a buffer in the short- to mid-term, limiting the impact on LNG markets, according to industry analysts.
Pipeline flows of gas through Ukraine have not been impacted by the political upheaval in Ukraine.
Russia is Europe's largest single gas supplier and about half of that gas passes through pipelines in Ukraine.
If Russian gas transited through Ukraine were to be interrupted, there would not be enough additional pipeline gas or LNG availability to compensate for the shortfall, according to Noel Tomnay, head of Global Gas at consultancy Wood Mackenzie.
"Even transiting more gas through non-Ukraine routes would probably still leave Europe short of about 30 billion cubic meters of gas [annually], so you couldn't completely compensate for loss of Ukraine transit," Tomnay said.
Tomnay said LNG "prices would spike that's for sure. You just wouldn't be able to find enough LNG at prices that would make it worthwhile to use that gas."
In addition Tomnay said European buyers would "be competing with Asia for the same LNG, so demand in Europe would certainly be hindered."
The situation in Ukraine has yet to result in higher spot demand for LNG, despite prompt prices for European pipeline gas rising since the weekend. Much of Monday's price increases, however, were unwound by the end of Tuesday's trading session.
The impact on LNG demand and prices would be mitigated by high onshore gas storage levels in Europe unless there is a sustained interruption of Russian gas through Ukraine, said Javier Diaz, senior energy analyst for LNG at Bentek Energy, a unit of Platts.
"In Europe the [gas] storage levels are really high. There should be enough gas for the next four months. Unless the conflict really escalates we should be OK," Diaz said.
In the longer term, Tomnay believes the conflict would encourage countries reliant on Russian gas to further consider LNG as an alternative.
"Some countries will inevitably accelerate plans for regasification terminals. There are sweet spots where some countries might be prepared to pay a premium in order to try to attract non-Russian gas into the market."
Ukraine currently has no LNG import terminals, but it has has aimed to rent a floating LNG platform from US-based company, Excelerate Energy.
This offshore plant is meant to facilitate the importation of LNG until a permanent onshore facility is built.
Ukraine sees Qatar as a primary potential source of supply, and has also been seeking investments from the country.
