Gazprom supplies more gas to Europe but lowers its price

Gazprom increased natural gas exports to European countries by 14 % in the first half of the year compared with the first half of last year. This was driven particularly by a stronger first quarter. Gazprom continues to expect demand for Russian gas in Europe to grow and to be stronger than LNG imports. 

According to data presented by Gazprom chief executive Alexey Miller at the annual general meeting, exports to Europe are continuing to rise. In 2015, exports increased by 8 % year on year.

According to preliminary data, this trend is continuing this year. In the first half of this year, exports rose by 14.2 % year on year, representing an increase of 10.6 bcm. Gas exports to Germany, Poland and France grew the most. All of these countries imported 1.3 to 1.5 bcm more natural gas than in the same period last year.

The statement also compared imports in the form of liquefied natural gas (LNG) and via pipelines. According to Miller, Nord Stream utilisation reached 70 %, while capacity utilisation at LNG terminals in Europe stands at around 25 %, as confirmed for 2014 by the following study. Terminal utilisation varies considerably between countries, ranging from 4 % in the Netherlands to 35 % in Italy.

The Nord Stream 2 pipeline, which is controversial from the perspective of European legislation, is intended to meet growing demand for natural gas in Europe. Gazprom agreed on the project with BASF, Engie, OMV and Shell. In addition to doubling transport capacity, it will significantly shorten the gas transport route. As a result, this could reduce the cost of transporting the commodity by up to half.

Gazprom is moving towards new methods of selling gas to European countries. Auctions have recently proven to be an effective sales method, complementing long-term contracts. The first auction was held in 2015 and reached a volume of 1.2 bcm, purchased by 15 existing and new customers.

The second auction took place in the spring of this year and was intended for customers from the Baltic states. The auction reached a volume of 0.42 bcm. Another auction will take place later this year and will focus on Western Europe.

However, the price of the commodity that Gazprom supplies to Europe is also gradually falling. For 2016, the average price will reach $199 per 1000 m³. In 2015, it was $238, and a year earlier it was as high as $348.