The loss of its biggest market and harsher economic sanctions will cost Russia $1 trillion in hydrocarbon export revenues by 2030, the International Energy Agency said on Thursday.
Russia’s oil and gas production will decline over the decade as exports to Europe come to a halt due to logistical issues and sanctions, IEA executive director Dr Fatih Birol said in a virtual media briefing.
Russia has slashed its natural gas exports to the EU by 80 per cent in response to wide-ranging sanctions that have paralysed Russia’s economy.
“There's no way back for the EU-Russia gas relationship, and that relationship was built up over 50 years on the basis of trust,” Tim Gould, the IEA’s chief economist, said.
“That trust has disappeared,” he added.
An EU deadline to stop importing Russian waterborne crude is on December 5 while a ban on refined products takes effect February 5.
Russia's share of global oil exports will drop once the EU ban kicks in and natural gas exports will halve by 2030 from current levels, the IEA said in its report.
The country’s share of internationally traded energy will fall to 13 per cent in 2030 from 20 per cent in 2021 while the US and the Middle East gain market share, according to the IEA’s stated policies scenario, which is based on current policy settings.
China, the world’s biggest crude oil importer, has been buying discounted crude oil from Russia since the war began. However, analysts say the world’s second-largest economy will be less inclined to increase its energy reliance on Moscow.
“Some people assume that Europe’s loss is China’s gain … but things are really not that simple,” Mr Gould said.
“Gas demand growth in China's future is nowhere near as strong as it has been in recent years,” he added.
Crippling economic sanctions will hurt Russia’s ability to develop gas-rich regions like Eastern Siberia and the Arctic, Mr Gould said.
Oil markets are closely watching how a price cap on Russian oil will be enacted by the Group of Seven nations. The cap, which is meant to reduce revenue for Russia’s government, is expected to come into effect on December 5.
“Oil is mustering up a nice rally as energy traders try to price in a China recovery that will unfold over the next few months,” Edward Moya, Oanda's senior market analyst, said in a research note on Thursday.
China will most likely continue with its zero-Covid policy, which has the backing of President Xi Jinping.
Frequent pandemic lockdowns in major cities in China have dampened oil demand.
The country’s crude imports in August rose to 9.53 million barrels per day, up 715,000 bpd from July. However, they were still down 986,000 bpd on a year-on-year basis.