The announcement of a deal being reached for Power of Siberia 2 has the potential to be the most consequential news of the year for LNG markets.
The publicly announced details are however limited, and a lot still needs to happen for the project to become a reality, so some caution is needed. Also, this additional volume of supply from a geopolitical ally may lead to overall higher Chinese gas demand than would otherwise occurred, which may partially dampen the impact on the LNG market.
The impact of such supply is also likely to be felt only from the early 2030s onwards, making it unlikely to materially worsen the impact of the current wave of supply under construction.
Nevertheless, the key takeaway is that the addition of 50 Bcm of Russian pipeline supply would likely bring forward peak Chinese LNG demand by multiple years. This would have profound consequences on the long-term outlook for the market (2030+). The most important is likely to be an earlier overall peak in global demand and a stronger dependence on India and Southeast Asia in sustaining global demand growth.
Source: Giovanni Bettinelli
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