The White House is working with European allies to ensure adequate natural gas supply in the event Russia cuts off access, press secretary Jen Psaki said this week.

During a gaggle with the press, Psaki confirmed that the Biden administration has been working on contingency plans if Russia were to invade Ukraine. Russia is a major gas pipeline supplier to Europe and has infrastructure that traverses part of Ukraine. 

To that end, discussions are underway between the White House and global gas producers, including liquefied natural gas (LNG) exporters.   

“Our approach is not about any one country or any individual entity,” Psaki said. “We’re engaging with a range of countries and partners” if there were to be “shortages.” 

She did not divulge specifics about the conversations.

Coordinating ‘Response Planning’ 

Psaki said “disruption, of course, in physical energy supplies transiting…Ukraine would most acutely affect natural gas markets in Europe.  And so, we’re engaging our European allies to coordinate response planning, including how to deploy their existing energy stockpiles. That’s part of it.”

The White House also is “working to identify additional volumes of non-Russian natural gas from North Africa and the Middle East, Asia and the United States. We’re in discussion with major natural gas producers around the globe to understand their capacity and willingness to temporarily surge natural gas output and to allocate these volumes to European buyers…

“We’re also engaging with major buyers and suppliers of LNG to ensure flexibility in existing contracts and storage is managed and enables diversion to Europe. So, we are, of course, preparing, as we are in a lot of other areas, a range of contingencies should there be a disruption, for a range of reasons, to natural gas.”

The natural gas markets “are very regional by nature,” Psaki said, “given constraints on how much can be exported. So, any reduction in Russian exports of natural gas to Europe would have a minimal impact on U.S. prices.  That’s what our anticipation would be.”

President Biden is scheduled to meet next week with Qatar Emir Tamim bin Hamad Al Thani, Psaki disclosed. The U.S. ally is one of the world’s largest gas exporters. No other details were provided about the planned discussions.

Is TTF Resisting Downward Price Pressure?

Meanwhile, concerns about the tense situation on the Russian-Ukraine border have “triggered an unexpected period of volatility for gas markets,” with Title Transfer Facility (TTF) prices again rising to levels above $30/MMBtu, according to Rystad Energy.

The TTF February contract finished at $30.35 on Wednesday, down from $31.01 on Tuesday. The TTF March contract finished at $30.17, versus $30.82 Tuesday. TTF contracts farther down the curve through the summer finished higher. 

Gas flowing into Europe from Russia’s Velke Kapusany compressor station on the Ukraine/Slovakia border increased around 36% on Wednesday, “marking a nearly one-month high for the route and roughly double last week’s volumes,” according to research note from Schneider Electric on Wednesday. “However, the downward move in prices is limited, as imports are still below previous norms, and tensions on the Ukrainian border continue to present market risk.”

In a note Wednesday, Rystad senior analyst Wei Xiong said the TTF had “resisted downward pressure for the past few weeks” but has since surged, lifted by bullish impetus from Russia-Ukraine tensions, which show no sign of abating – a geopolitical uncertainty which commodity markets are struggling to price in.”

Fears of a “prolonged period of scarce Russian exports to Western Europe” have been stoked as European storage, at 42% of capacity, “races to the bottom” Xiong said. However, LNG imports “have been robust in recent days, helping to offset some of the bullish momentum from other factors and keep prices in check.”

The Center for Strategic & International Studies (CSIS) also weighed in recently about Ukraine’s importance to European gas markets. CSIS’s Nikos Tsafos, James R. Schlesinger Chair for Energy and Geopolitics, said last week “Ukraine used to be a key node in the European energy system, but its criticality has diminished.

“In the 1990s, most gas that Russia exported to Europe crossed Ukraine. But Russia has since diversified routes,” Tsafos said.

By constructing other pipeline systems, Russia had reduced Ukrainian gas transit by 70% as of last year, he noted. 

Russia was transporting more than 140 billion cubic meters (Bcm) of gas through Ukraine in 1998. It was under 42 Bcm last year.

“As Ukraine’s transit role diminished, so did the number of countries that depended on it for supplies,” Tsafos wrote. By 2021, Ukraine was a transit corridor largely for gas going into Slovakia, from where it continued to Austria and Italy. 

“There was a time when Ukraine sent a lot of gas south, to Romania, Bulgaria, Greece and Turkey, but TurkStream changed that. Even Hungary, the second-largest recipient of gas from Ukraine in 2021, stopped imports in October 2021.”