Kremlin-controlled Gazprom’s gas exports that will be sent to Europe may fall by nearly a third in 2022 as a result of the crisis in Ukraine, rivalry with liquefied natural gas, and plans to switch to rouble payments, according to analysts on April 22.
Russia accounts for nearly 40% of European gas supply, but the West seems to have been trying to wean itself off Russian energy flows with growing urgency since the nation started what it calls its “special military operation” in Ukraine on February 24.
The plans to charge ‘unfriendly’ nations for gas sales in roubles have also undermined prospects for the Russian gas exports, according to analysts, as Europe stated that it amounted to ‘blackmail’ and nearly unanimously refused to comply.
One analyst from the Energy Centre at Moscow’s Skolkovo School of Management, Sergei Kapitonov, stated that Gazprom supplies to Europe might fall by 40 billion-45 billion cubic meters (bcm) in 2022 from nearly 150 bcm in 2021.
The head of gas market research at Rystad Energy, Sindre Knutsson, stated that pipeline volumes can plunge even further:
“Driven by a push from buyers to become less reliant on Russia, or by Russia holding back volumes, for example, driven by a disagreement on which currency the gas should be paid in”.
He also never ruled out stoppage inflows via Ukraine in case the conflict prohibits pipeline operations from continuing safely. Gazprom is yet to disclose its expectations for gas exports to Europe. The firm never responded to a comment.
The top consumers of Gazprom’s gas in Europe last year were Germany which took 45.8 bcm, Italy went with 20.8 bcm, and Austria, taking 13.2 bcm. Currently, Russia is Germany’s top supplier, delivering around a third of its gas, while Italy gets some 40% of the imported gas, and Austria 80% of its natural gas, from the nation.
For now, just Hungary has agreed to move to the gas-for-roubles scheme, which features buyers making some foreign currency payments via Russia’s Gazprombank that would eventually change it into roubles.
Interestingly, an internal European Commission note said that payment for Russian gas in roubles by the European Union buyers would break the EU’s severe sanctions regime against Moscow.
One speaker from the Institute for Energy and Finance Foundation, Alexei Gromov, explained that Russian pipeline gas might be partially supplanted by sea-borne liquefied natural gas from the US and from Russia’s Novatek, which is not compelled to charge clients in roubles.
Gromov said that the Russian pipeline gas exports to the European Union might reach some 105 bcm this year.
