FT: Gazprom will not make up war-related gas export losses even within ten years

Russian state-owned gas exporter Gazprom will be unable to make up for the loss of sales caused by circumstances stemming from Russia’s military invasion of Ukraine, even within ten years. This is according to an analysis commissioned by the company’s management and reported today by the British newspaper Financial Times (FT).

Gazprom’s exports to Europe are expected to average around 50 to 75 billion cubic metres a year through 2035, according to the analysis. That is less than a third of pre-war levels.

The analysis is „one of the frankest admissions“ that sanctions imposed in response to the military invasion have harmed the state exporter and Russia’s energy sector, FT writes. Gazprom’s management commissioned the 151-page report towards the end of last year.

The document stresses that sanctions have cut off Russia’s energy industry from key technologies, such as turbines that help transport gas through pipelines.

A shortage of spare parts and the expertise to repair them is also proving to be a problem. According to the analysis, up to 75 percent of turbine parts come from Western countries. Russian companies will be able to repair US-made turbines only next year, according to Russia’s Ministry of Energy.

Gazprom believes that the new Power of Siberia 2 gas pipeline to China will help replace lost volumes of exports to Europe, but its capacity will be only 50 billion cubic metres a year. The prices Beijing is willing to pay are also significantly lower than those in Europe.

Moscow and Beijing have also yet to agree on completing construction of the pipeline. According to FT sources, Russia considers Beijing’s pricing demands unreasonable. China wants the price it pays for gas from the new pipeline to be close to the heavily subsidised prices on Russia’s domestic market. It also wants to commit contractually to buying volumes amounting to only a fraction of the pipeline’s capacity, FT writes.

In May, however, Russia increased its average daily pipeline gas exports to Europe by 39 percent year on year. The increase was 7.3 percent compared with April, Reuters reported, citing its own calculations. Gazprom exported a total of 13 billion cubic metres of gas to Europe in the first five months of this year.