Empty route – Newspaper Kommersant No. 10 (7455) dated 01/20/2023

Gazprom continues to actively reduce gas supplies to Europe along the main existing export route – through Ukraine. Gas pumping fell by 23% on January 19, and has fallen by 40% since the end of December. Deliveries via Turkish Stream also fell to the level of November. The decrease in supplies may be due to the fact that European consumers are reducing the selection, not wanting to buy gas at high December quotes against the background of a sharp decline in prices in Europe in January.

On January 19, Gazprom reduced pumping through the Sudzha GIS through Ukraine towards Europe to 25.1 million cubic meters, which is 23% lower than the day before, the company said. The GTS Operator of Ukraine (OGTSU), in turn, said that it had accepted an application from Gazprom for transit in the amount of 24.4 million cubic meters. The application for transit through the second border GIS – “Sohranovka” was traditionally rejected by Kyiv. Deliveries through it stopped in May 2022.

At the moment, the Ukrainian route and the Turkish Stream under the Black Sea are the only options for Gazprom to export to Europe. Before the Ukrainian crisis, pumping went through the Yamal-Europe pipeline through Poland to Germany, and the main supply route was the Nord Stream gas pipeline along the bottom of the Baltic Sea to Germany, but transportation through it was stopped in early September, and soon the pipe was blown up as a result of sabotage.

Although one line of Nord Stream allegedly survived, Deputy Prime Minister Alexander Novak said on January 19 that it was too early to talk about the resumption of supplies.

According to him, the examination of Nord Stream and the nearby Nord Stream 2 is ongoing, and there are no final conclusions about their integrity yet.

Since mid-2022, Gazprom has been steadily supplying 41-43 million cubic meters per day through Ukraine, avoiding sharp fluctuations in pumping. But from January 4, exports in this direction began to gradually fall against the backdrop of a sharp cooling in Russia and a simultaneous abnormal warming in Europe. By January 19, daily pumping volumes fell by 40% compared to the level of the end of December. Press Secretary of the President of the Russian Federation Dmitry Peskov forwarded the issue of reducing transit volumes to Gazprom. The Ministry of Energy did the same. The company declined to comment further.

At the same time, deliveries via the Turkish Stream to Europe also decreased by mid-January to 23 million cubic meters per day, which is apparently due to a decrease in demand for gas due to warm weather.

Current supplies are at the level of November 2022, while in mid-December they reached 45 million cubic meters per day. The decrease in selection from European consumers may be due to the fact that they now buy gas from Gazprom at December quotations, which averaged $1,260 per thousand cubic meters, while in January spot gas cost an average of $720 per thousand cubic meters.

Gas prices in Europe do not react in any way to the reduction in Russian gas supplies against the backdrop of record high reserves in underground storage facilities. In addition, the volume of supplies from Gazprom itself is now less than 5% of European consumption.

Gas prices in Europe fell sharply in January, closing on January 19 at $661 per thousand cubic meters on the TTF index. A decrease in both prices and volumes could reduce Gazprom’s revenue from exports to Europe in January, according to Kommersant’s estimates, by a third compared to December, to $2.1 billion, while in February the figure could fall by about half.

It is practically impossible to predict the volume of Russian exports to Europe in 2023, since much will be determined by the political situation, notes independent expert Alexander Sobko. In any case, he says, the baseline forecast is for exports to decline from 2022, as Russian exports to Europe remained substantial until last May. “If we translate the current volumes of Russian exports to Europe into annual values, then they will amount to about 20–25 billion cubic meters, which means a decrease in annual exports by 35–40 billion cubic meters compared to 2022,” the expert notes. But, he explains, a warm winter and a austerity regime have resulted in Europe going through the “equator” of winter with storage facilities at 80% full, when they were 45% full at this time a year earlier. In absolute terms, the difference is almost the same 40 billion cubic meters, which Gazprom may not supply this year.

Olga Mordyushenko