LNG markets to benefit from Russian gas supply tightening

Published 28-APR-2022 08:10 A.M.

2 min read

This week Russia declared that it would be cutting off gas supplies to Poland and Bulgaria as of Wednesday.

Off the back of this announcement, European gas futures traded ~17% higher as both Poland and Bulgaria are forced to look for alternate supply routes.

This is where the European problem starts to become an international one, as the Europeans look to secure supply through the international LNG markets.

All of a sudden there is an influx of demand into an already tight market, where the Asian countries are already buying up whatever spare capacity of LNG there is on the market.

This quote from Credit Suisse energy analyst Saul Kavonic really highlights this point, “If Russian gas flows into Europe are shut, LNG prices could rise to over $US100/MMBTU as Europe scrambles to suck more gas away from Asia to make up for part of their shortfall”.

As gas supplies increase in terms of strategic importance, the latest investments in our Catalyst Hunter portfolio, Prominence Energy (ASX: PRM) and Global Oil and Gas (ASX: GLV) are preparing to drill one of 2022’s highest impact oil and gas wells.

PRM and GLV have a combined 37.5% interest in the Sasanof Prospect located in the North West Shelf, offshore WA. The North West Shelf is home to ~47mtpa of LNG processing capacity and a supply source for global LNG markets.

The Sasanof Prospect has a prospective resource of 7.2 trillion cubic feet and 176 million barrels of condensate on a 2U basis (unrisked mid case).

PRM and GLV have timed the drilling program to perfection and in the event that a discovery is made, a project with the size and scale of the Sasanof prospect could become of interest to both domestic and international players looking to secure gas supplies.

In our last note we touched on the takeover of AWE in 2018, which made one of Australia’s largest ever onshore discoveries. An indication that when a large gas discovery is made in Australia, it almost certainly pops up on the radar of major players in the oil and gas industry.

To see the key reasons we invested in PRM and GLV, what we want to see from the upcoming drilling program, the risks to our investment thesis and our investment plan check out our launch note here.