Russian Gas Exports Soar on Europe Heatwave

Russia’s pipeline gas exports to Europe increased in July to the highest level since the halt of supplies via the Nord Stream link in August 2022.

The sole pipeline gas exporter, state-run Gazprom, supplied some 2.7 billion cubic meters to Europe, excluding Turkey, in July, up 34% from June levels, Energy Intelligence calculates based on gas transmission data.

That is still 32% less than Gazprom supplied in July 2022, when it kept sending gas via the Nord Stream offshore pipeline to Germany, although already in very restricted volumes. Gazprom stopped Nord Stream flows in late August and continued to only use two routes — the Ukrainian transit and the Turk Stream pipeline.

Exports reached the 11-month high in July mainly thanks to a sharp increase in Turk Stream flows that supply southern and eastern Europe.

The growth is understood to be mainly driven by a decrease in Gazprom’s hub-linked contract prices and a prolonged heatwave that spurred cooling demand in southern and central Europe. Gazprom’s hub-linked prices followed the downward spot dynamics of previous months. Spot prices did not grow much despite the heatwave-driven demand increase, but the narrowed gap between spot and falling Gazprom prices made Russian gas offtakes more attractive to buyers than in previous months.

Turk Stream Leads Growth

Turk Stream flows to Europe have been more sensitive to price and demand volatility over the past several months than the Ukrainian transit which supplies a limited number of markets in central Europe and Italy tending to stick to the minimal take-or-pay offtakes from Gazprom amid the war in Ukraine.

Ukrainian flows increased 3.9% on the month but decreased 0.2% on the year to 1.3 Bcm in July. Meanwhile, exports via the Europe-bound string of Turk Stream shot up 82% on the month and increased 5% on the year to some 1.4 Bcm.

Turk Stream’s month-on-month growth in July was additionally spurred by a one-week planned maintenance in June, but even without the seven no-flow days of June taken into account, the average daily flows of 46.3 million cubic meters per day in July were 40% higher.

In July, Turk Stream flows increased particularly in Hungary and Greece — 67% month on month to some 620 MMcm and 94% to 190 MMcm, respectively. The growth in Greece might be attributed to the change in the price situation which prompted Greece to take more Russian gas. In the beginning of this year and in May, when the gap between Gazprom’s and spot prices was wider, Greece preferred to ship gas from its LNG terminal in reverse mode to Bulgaria, meaning Turk Stream physical gas flows from Bulgaria to Greece were zero. Most of Hungary’s incremental imports are understood to be sent to Ukraine for storage. Hungary sent 224 MMcm to Ukraine in July, up from 60 MMcm in June, the Ukrainian gas transmission system operator said on Aug. 2.

Turk Stream operated 7% above its Europe-bound 15.75 Bcm/yr capacity in July. Launched at the beginning of 2020, it hit an all-time high of 50.44 MMcm/d, 17% above capacity, on Jul. 14, slightly exceeding the previous record of 50.42 MMcm/d posted on Mar. 1, 2022, five days after Russia’s invasion of Ukraine that caused a spot price rally and prompted buyers to offtake as much Russian gas as they could for fear of possible supply cut-offs because of the war.

On Aug. 1, Turk Stream flows to Europe hit a new record of 50.9 MMcm/d, according to transmission data.

Russian LNG Turns to Asia

While piped gas exports grew, Russia’s LNG exports to Europe decreased 18% to 950,000 metric tons in July, as the key Yamal plant of privately owned Novatek increased shipments to Asia via the eastward Northern Sea Route, according to Kpler data.

Yamal supplied 880,000 tons to Europe last month, down from 1.03 million tons in June, while its exports to Asia jumped to 650,000 tons from 370,000 tons.

Russian LNG exports to Europe, mainly coming from Yamal, amounted to half of pipeline gas supplies in July, but in previous months they had been quite comparable in size due to a sharp drop in piped gas exports since the start of the war in Ukraine (see graph).

Gas Production Falls

Due to a sharp drop in pipeline gas exports to Europe in summer 2022, caused by the reduced and then halted flows via Nord Stream, Russia’s natural gas production fell some 12% on the year to around 362 Bcm in the first seven months of 2023, Energy Intelligence estimates.

In July, Russia’s gas production decreased just 3% on the year to 42.6 Bcm, as in July 2022, production had already been hit by the restricted Nord Stream flows.

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