Energy Transition Outlook

Impact of the Russian invasion of Ukraine

At the time of publication, Russia continues to wage war on Ukraine. Devastating consequences are being felt mostly in that country, but the reduction in commodities output, notably cereal, oilseed and potash for fertilizers is deepening worldwide food insecurity — already impacted by climate change and COVID-19 before the invasion.

The war has also sent shockwaves through world energy markets, due to OECD-led sanctions against Russian energy exports, that are likely to have considerable long-term consequences even after what now looks to be a protracted war is over. Some 40% of European gas consumption has been covered by Russian exports in recent years. Terminating this source of supply — in line with EU plans — before 2025, will lead to large changes in not only the European arena, but also globally. In the short term, energy efficiency and the LNG trade will be the main beneficiaries of a choking-off of Russian gas exports. But in the longer term, the combined effect of higher gas prices, and policy support — including tough mandates — for renewable energy, will hasten the European energy transition. 

Our initial assessment (DNV, 2022) showed that, relative to our pre-invasion forecast, sanctions on Russian energy exports and its consequences will reduce overall European final energy demand. Since then, the war on gas has become even stronger, and we now find European 2030 gas consumption to be 26% lower, and European 2030 energy related CO2 emissions to be 8% lower, than we found a year ago. 

Despite the fall in European gas demand, global gas shipments (LNG and LPG — measured in tonne-miles) will expand by 12%, as empty gas pipelines from Russia will be replaced not only by piped gas from the North Sea and Middle East / North Africa to Europe, but notably by North American shale and Middle East gas — on-keel. 

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