Ben van Beurden, the CEO of Shell, recently warned about the low spare capacity in the oil markets and raised doubts about replacing Russian gas with LNG in Europe.
The supply situation is tight as Russia’s refined product exports are restricted due to sanctions, he said. The Shell CEO also blamed China for “deliberately or for domestic reasons” not exporting petroleum products.
Among OPEC, only a few countries like Saudi Arabia and the UAE are said to have excess spare capacity. Aramco, the state-owned oil giant in Saudi, has claimed that it can output up to 12 million barrels of oil per day, a million more than the August target of 11 million barrels per day set for the kingdom by OPEC+.
However, Aramco had an output of 11 million barrels per day for just eight weeks in its history. Whether Saudi Arabia can sustain this level of output for the remainder of 2022, and further into next year, is uncertain.
European Gas Supply SituationWhile speaking to reporters, van Beurden also revealed his concerns about the gas supply situation in Europe. The maintenance of Nord Stream 1 has resulted in a decline in Russian gas supplies, due to which European buyers are turning to LNG imports. This has triggered concerns about supplies ahead of the peak winter season demand, van Beurden said.
The Shell CEO thinks it is “impossible” to replace the entire pipeline gas capacity out of Russia with LNG. If Europe is not willing to take “significant measures” like rationing and energy savings, things can get “problematic,” he warned, according to Reuters.
“Depending on its timing, a complete cut-off of Russian gas supplies to Europe could result in storage fill levels being well below average ahead of the winter, leaving the EU in a very vulnerable position,” Birol said. “In the current context, I wouldn’t exclude a complete cut-off of gas exports to Europe from Russia.”