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🔥EU Gas Looks Long-Term

A mild winter was a lucky draw for a region losing its largest gas supplier, and EU officials aren’t keen on relying on serendipity a second time. 

This week, EU countries and Ukraine met to discuss joint-purchasing schemes to improve region-wide procurement, with the first contracts expected this summer. 

The region doesn’t want short-term, volatile deals, either. It’s after energy security, and non-EU Norway has raised its hand to help the buyers find supply. 

In the months following Russian-owned Gazprom’s departure from the Union, Norway’s majority state-owned Equinor stepped in to become Europe’s leading supplier. 

Equinor wants more and is willing to play ball if the EU’s joint purchasing scheme follows through with long-term deals. 

After investing in production to meet the region’s demand, the company wants assurance that the rug won’t be pulled from under its feet if the EU looks elsewhere for supplies. 

In 2022, Equinor produced 1,589 bcf (45 bcm), or ~36%, of Norway’s ~4,372 bcf (123.8 bcm) of natural gas. 

🛢️Oil’s Regional Shifts

Sanctions against Russia over its efforts in Ukraine are inverting historical European-Asian price discrepancies. 

Without the EU consuming Russian oil, Asia is enjoying newfound purchasing power, chipping away at the ‘Asian premium’ the region used to pay to secure oil from big exporters like Russia and OPEC members. 

Now, Asian buyers are securing exports like Russian Urals crude at discounts of $15-$20 per barrel, a figure that compounds quickly when refiners process hundreds of thousands of barrels daily. 

Eroding the Asian premium isn’t the only benefit for buyers, either. As discussed in last week’s Energy Shots, western sanctions on Russia are eating away at the dollar’s historical dominance in international transactions. Asia is buying supplies at better prices and doing so in non-dollar currencies. 

On the other hand, Europe’s crude is following a similar trend as its natural gas supplies. Norway’s Equinor has stepped in with oil from the Johan Sverdrup field to fill most of the gap. 

Whether the European-Asian inversion is lasting or fleeting largely depends on the resolution and aftermath of the Russia-Ukraine conflict. 

Quick Shots:

⚛️Europe Splits Over Nuclear-Powered Hydrogen

EU renewable energy targets are in limbo as countries dispute nuclear’s role in producing low-carbon fuel in the region. In the opposing corner, Germany, Ireland, Denmark, Austria, Luxembourg, Spain, and Portugal want to restrict targets to exclusively renewable sources, a pool that doesn’t include nuclear.

Meanwhile, nuclear-dominant proponents like France and Poland argue that nuclear would speed up the EU’s decarbonization mission. Currently, the only solution on the table is to include nuclear in provisions for other EU energy laws. 

💰TotalEnergies Near $27B Iraq Oil Deal

A deal signed in 2021 between Iraq and TotalEnergies for long-term oil and gas investments is nearing resolution. The initial stage of the proposal included four projects in the country’s south to the tune of $10B over 25 years, split between oil, gas, and renewables. Final terms depend on how parties will distribute shares.