By Avi Salzman

The European Union plans to block all Russian natural gas from the continent by 2027, the European Commission said this week.

The commission's stance means that even if Russia and Ukraine sign a peace deal, Russian natural gas producers will have a tough time accessing the European market.

Russia supplied as much as 45% of Europe's natural gas before it invaded Ukraine in 2022. It still supplies about 19% through pipelines and liquefied gas shipments, despite sanctions imposed by the EU.

A full Russia ban could be a boon for a few companies providing alternate sources of natural gas supply.

The biggest winner would probably be Equinor, a Norwegian energy giant that accounts for about one-third of Europe's imports of natural gas today. Equinor produces oil and natural gas from offshore locations in the North Sea.

In an interview with Barron's earlier this year, Equinor CFO Torgrim Reitan said it costs the company about $2 per million British Thermal Units to produce natural gas and then sell it into the European market at much higher market prices. The market price is generally set at the cost of liquefied natural gas that is shipped from overseas, which trades at a premium because it is costlier to make. These days, LNG in Europe is selling for around $11.50 per million BTUs.

"The margins are very good and sustainable," Reitan said.

The other big winners from a Russian ban would be American LNG companies like Venture Global, Cheniere Energy, and New Fortress Energy. They now supply about 17% of Europe's natural gas needs, but would be called on to supply more in the event that Russian gas is banned.

Write to Avi Salzman at avi.salzman@barrons.com

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May 07, 2025 14:31 ET (18:31 GMT)

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