Is the war in Ukraine degassing Gazprom?
Gas production by Russia's state-owned Gazprom drops nearly 20 percent; exports drop by more than 40%. Sales at home are also weak, and China will not be able to compensate for the loss of the European market. All the details
Natural gas production and export levels of Gazprom – Russia's largest government-controlled natural gas company – continue to decline. From January 1 to November 15, output fell by almost 20 percent on an annual basis, while exports by more than 40 percent.
THE DECLINE IN PRODUCTION AND EXPORTS
Specifically, the company said it produced 359.7 billion cubic meters of gas between January 1 and November 15, 19.2 percent less than in the same period in 2021. Exports that went to the outside the territory of the former Soviet Union they instead amounted to 93.2 billion cubic meters, 43.4 percent less.
NO DATA ON CHINA
Gazprom said supplies to China via the Power of Siberia pipeline had increased and exceeded the volumes agreed in contracts, but did not provide numbers.
Read also: Why Russia won't be able to replace Europe with China on gas
THE FALL IN DEMAND IN RUSSIA
In Russia, however, the company said a 5.9 percent drop in energy demand, which could signal a recession in the industrial sector.
THE REASONS FOR THE DECLINE
Gazprom's exports – and production levels, as a result – have collapsed as a result of the limitation or interruption of gas supplies to European countries that have refused to switch to payment in rubles, the Russian currency: the decision was taken in unilaterally, i.e. without taking into account contractual clauses, by Russian President Vladimir Putin in retaliation for the sanctions imposed after the aggression against Ukraine.
The European Union, Gazprom's main market, has said it wants to eliminate hydrocarbon imports from Russia, its main supplier, by 2027.
THE PERSPECTIVES
Despite the sharp reduction in sales in Europe, Gazprom still continues to record substantial revenues thanks to high gas prices. However, the longer-term outlook does not appear to be positive for the company.
As POLITICO wrote, Russia will hardly be able to replace the European market with the Chinese one. Today Moscow sends about 16 billion cubic meters of gas to Beijing through the Forza of Siberia pipeline.
It is true that China wants to secure another 10 billion cubic meters through a pipeline in the far east of Russia, plus another 50 thanks to the doubling of Siberia's Force (however, the construction of the new pipe will begin in a few years). But this is still a much lower total volume than what Gazprom supplied to Europe before the war, over 150 billion cubic meters. Not to mention that the company sells its gas to China at much lower prices than those to Europe.
In essence, even if Russia were to succeed – and it is not certain – to pour into China the volumes once pumped into Europe, it will not succeed with the revenues.
This is a machine translation from Italian language of a post published on Start Magazine at the URL https://www.startmag.it/energia/gazprom-produzione-esportazione-15-novembre-2022/ on Thu, 17 Nov 2022 05:33:59 +0000.