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Gazprom may not be able to recover the impact of Western sanctions on its gas sales until at least 2035 and could lose market share to LNG producers such as Novatek.
This is what emerges from a report commissioned by the leaders of the Russian energy company last year, reported on Wednesday 5 June by Financial Timeswhich represents one of the most in-depth accounts of how Western sanctions in response to the Russian invasion ofUkraine have damaged Gazprom and the entire Russian energy sector.
The study estimates that Gazprom’s exports to Europe will average 50-75 billion cubic meters per year by 2035, just a third of pre-war levels. On Wednesday 5 June the stock on the Moscow stock exchange closed unchanged at 198 rubles.
At least ten years to reduce losses
In the 151-page document, the authors write that «the main consequence of the sanctions for Gazprom and the energy industry it is the contraction in export volumes, which will be brought back to 2020 levels not before 2035».
Gazprom, as indicated by Sergei Vakulenko, a senior fellow at the Carnegie Russia Eurasia Center in Berlin and head of Strategy at Gazprom Neft, regularly commissions research from external bodies and uses it to support his claims for preferential treatment and additional funding from the Kremlin. Since the research emerged, Gazprom’s share of Russian energy exports will decrease due to the impact suffered in the two years of war and sanctions, in favor of a greater orientation towards liquefied natural gas which could benefit LNG producers such as the Russian giant Novatek. On top of this, experts predict that Gazprom will struggle to revive itself and restart growth without major help from the state in finding new markets for its gas.
The fallback on China
Meanwhile, Moscow is reportedly trying to close an agreement with Beijing for the extension of the gas pipeline Power of Siberia 2, which will connect Russia to China via Mongolia. If completed on schedule, the Power Siberia 2 pipeline could guarantee an additional capacity of 50 billion cubic meters per year, but negotiations have currently stalled because the Kremlin considers Chinese requests on price and supply levels to be “unreasonable”. of gas.
The push on LNG
There is one solution advocated by the study collaboration between Gazprom and Novatek, Russia’s largest LNG company, since LNG is seen as a more reliable source of export revenue for Russia because it is transported on ships, rather than pipelines. The report estimates that Russia’s LNG exports will increase to 98.8-125.8 billion cubic meters in 2035 from the 40.8 billion cubic meters reported in 2020, representing about half of total gas exports, increasing the influence of Novatek and other energy producers. In this scenario, to maintain its dominant position in the domestic gas market, Gazprom will have to exploit its monopoly on gas transportation infrastructure and ask for preferential treatment from the Kremlin. (All rights reserved)
