Gazprom, the Russian energy crown jewel, has
seen its valuation drop considerably in the last few months in tandem
with the Russian-Ukrainian crisis. Investors are having mixed reactions
about Russia’s investment environment, though some are still playing
roulette.
Sanctions against Russian-linked investments must be carefully
watched as they have significant valuation outcomes. Russia is now
excluded from the June G-8 meeting, which has been moved from its
original venue of Sochi. Interestingly, markets reacted Tuesday, March 25th, by raising the
stock price of Gazprom and Lukoil. In fact, Lukoil spiked 6% before
coming back down. Markets have settled into the current state of the
Russia-West standoff.
Shorting Russia, so to speak, potentially shorts many other firms like British Petroleum (BP), Exxon (XOM), Chevron (CVX) and Shell (RDS.B) (RDS.A).
Washington could extend sanctions in key industries, which includes
Russian energy, if any further challenges are initiated by Russia.
Many in Washington are wishing they had unlocked U.S. natural gas exports earlier.
But the issue is receiving center stage with testimony happening today
about accelerating liquified natural gas (LNG) exports. As a way to
strengthen energy positions, the North American energy trifecta
of the U.S., Canada and Mexico need steadfast, well-conceived policies,
keeping recent events in mind, but long-term goals front and center.
U.S. exports of LNG will not start officially flowing until the end of
2015 through Cheniere’s Sabine Pass facility located on the Louisiana
side of the Gulf of Mexico. Another new LNG facility was approved on
March 24th in Oregon.
Europe has options to diversify its
energy portfolio, but it will take time to develop. Each country has
differing energy portfolio options from European Union heavyweights like
France and Germany to more peripheral countries. In a Stratfor note, “A
South Stream pipeline project could come to a halt following an EU
summit during which leaders decided the Continent should decrease its
energy dependence on Russia, Euractiv reported March 24. The South
Stream would bypass Ukraine to deliver gas to Europe.” To diversify
Europe’s reliance on Russian oil and gas, new prospects like Cyprus and
Israeli gas in the Eastern Mediterranean and infrastructure that links
alternative routes and supply sources are being suggested.
A recent article “Russia’s Gazprom, European Energy And U.S. Oil And Shale Gas: Shorting Russia?”
highlights some of the drivers influencing energy politics and
economics that have been dominating headlines. On March 24th, investors
debated their positions, with a market consensus that Gazprom may have
hit bottom given today’s further rise. This current standoff between Russia and the West will likely take
twists and turns for some time in the future. Investors in energy may
need to brace themselves for a bumpy ride.
http://www.energytrendsinsider.com/2014/03/25/will-the-wests-energy-play-deter-russia/
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