Gazprom in the period of expulsion from the European market. Possible evolution of the Russian gas market amid impediments to exports

The year 2023 saw an even larger drop in Russian exports of pipeline gas to Europe. In the past two years, Gazprom failed to export some 120 bcm of natural gas, and these quantities are now locked up in Russia. This situation noticeably affects the financial standing of the gas monopolist.

Moreover, the government has no intention to ease the tax burden or reduce the scale of social obligations, primarily the pace of gas supply development in the country, including in Eastern Siberia and Russia’s Far East.

Another difficult case concerns extension of the current gas transit contract with Ukraine, which expires at the end of 2024.

This creates risks of losing more than half of the remaining quantities of gas exports to Europe. However, the question actually is whether it is worth expecting resumption of energy cooperation with Europe at all or it is time to look for strategic alternatives.

Gazprom is already looking for new opportunities. In 2023, China came out on top among buyers of pipeline gas from Russia, having surpassed Turkey. However, the increase in supplies does not yet compensate for losses on the European market. There is also the issue of costs and resources. The Power of Siberia 2 contract could change the situation, but it has not been signed yet.

There are other options, but they are hardly sufficient for restoration of the 2021 level of natural gas production. Meanwhile, the idling infrastructure means missed opportunities and money.

The new report by NESF elaborates on the following topics:

2023 results of exports

• Decline in supplies to Europe and Turkey since the launch of the special military operation
• Alternative variants – China and Central Asia
• Financial conditions of supplies

Financial standing of Gazprom

• Revenues
• The government’s tax policy towards Gazprom
• New rules of MET collection, new taxes
• Reduction in the investment program

Excess gas. Alternatives to pipeline gas exports

• Ammonia and methanol as new options
• Prospects for growth in gas chemical production in Russia

Is it really possible to expand LNG production?

• Strengths and weaknesses

Murmansk LNG as a new case:

• UGSS gas for liquefaction
• The American approach with Russian features

Possible variants of the future, main bottlenecks

• Tariffs and access to infrastructure

Contents of the report: