Gazprom's 2022 Exports Crash to New Lows

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Russian pipeline gas exports to Europe (including Turkey) and China are set to end up around 100 billion cubic meters in 2022, down 46% from 2021, if daily flows stay at their current levels in the remaining six weeks of 2022.

Exports will halve from the 2018 peak of slightly more than 200 Bcm, which the country’s sole exporter Gazprom said at that time would be a new normal for its pipeline gas exports to Europe this decade. It will also be the lowest level this century and in Russia’s post-Soviet history (see graph).

The drop is driven by a sharp fall in supplies to Europe amid the price crisis and the war in Ukraine, which prompted the EU to minimize purchase from Russia and Moscow to restrict the supply.

In the first half of November, exports to Europe (including Turkey) and China amounted to just 2 Bcm, or 133 million cubic meters per day, Energy Intelligence calculates based on Gazprom’s data.

Since the start of the year, Gazprom exported 93.2 Bcm to Europe and China, down 43.4% on the year, the company said on Nov. 15.

China Ramps Up

Exports to China have been in line with the schedule to ramp up to 15 Bcm this year from 10.39 Bcm in 2021, and daily flows may further increase by up to 20 MMcm/d sometime in December when Gazprom plans to start commercial supplies from the new Kovyktinskoye field.

But Europe is unlikely to increase purchases from Gazprom in December amid high gas stocks and relatively low spot prices, compared with the previous four months, while Gazprom also looks reluctant to step up deliveries.

Supply cuts by Gazprom in Europe, whether for economic or political reasons, have contributed much to the drop in exports. But the company blames the structural changes on the global gas market, which had resulted in a deficit of gas and higher prices before the war in Ukraine, Gazprom said in a statement last week following a management board meeting to discuss the implications of the current energy crisis for long-term development of the global energy market.

Gazprom echoes the Kremlin, which insists that the energy crisis is a result of Europe’s overreliance on spot gas imports and renewables.

Uncertain Future

The company insists that the current crisis has underscored the importance of fossil fuels for the global economy, reflected by an increased demand for coal and oil products. “In the majority of countries, the focus on decarbonization has faded into background,” Gazprom said in the statement.

This is in contrast to the West’s perception of the crisis, exacerbated by Russia’s invasion of Ukraine, as proving the need for an accelerated energy transition. “Russia’s war only enhances the urgency of the need to transition the world off its dependence on fossil fuels. True energy security means every nation is benefiting from a clean, diversified energy future,” said US President Joe Biden at the COP27 climate summit in Egypt on Nov. 11.

Despite the current uncertainty, global gas consumption will grow in the long run, Gazprom’s management believes. By 2040, it could increase some 20% from 2021 levels, the company said. China will be the key driver, exceeding the EU’s consumption by the end of this decade, according to Gazprom, which seeks to increase its own pipeline gas sales to China by pushing for the 50 Bcm/yr Power of Siberia 2 pipeline project on top of the existing 38 Bcm/yr and 10 Bcm/yr contracts with China National Petroleum Corp.

War Shortages

Gazprom says the first signs of shortages in global gas markets were evident already in 2021, arguing that the company’s higher production covered a major part of the world’s incremental demand last year.

Gazprom produced 514.8 Bcm of natural gas in 2021, a 13-year record, up 14%, or by around 60 Bcm, from 2020. Gazprom’s incremental production accounted for around one-third of the global gas demand increment, which the International Energy Agency estimates at around 170 Bcm in 2021, with total demand amounting to 4.1 trillion cubic meters last year.

In the first nine months of this year, global gas demand fell by more than 40 Bcm, with the EU accounting for around 85% of the decrease, Gazprom said.

“Politically motivated decisions by some countries to refuse from Russian gas imports” worsened the supply/demand imbalance in 2022, Gazprom argues. High prices in Europe resulted in increased imports of LNG, which was covered by the redirection of cargoes from other parts of the world rather than increased LNG production globally, Gazprom said, adding that this caused a deficit of energy resources in other countries.

For more coverage of the Ukraine crisis, visit Ukraine Crisis: Energy Impact >

Gas Supply, Ukraine Crisis
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