Mined the future – Newspaper Kommersant No. 2 (7447) dated 01/10/2023

According to Kommersant’s data, gas production in the Russian Federation fell by 11.8% at the end of the year, to 672 billion cubic meters, mainly due to Gazprom, which reduced supplies to Europe to historic lows. Independent producers, on the contrary, have increased production – Rosneft by 16%, NOVATEK by 1.7% – and thus can increase their share in the domestic market. Kommersant’s interlocutors in the market expect that by the end of 2023, Gazprom’s production will fall by another 30-40 billion cubic meters, which will fall mainly on the Nadym-Pur-Taza and, possibly, Bovanenkovskoye fields.

In 2022, the Russian Federation reduced gas production by 11.8% compared to 2021, to 672.57 billion cubic meters, sources familiar with the statistics told Kommersant. This is the lowest level since at least 2016, when 640.2 billion cubic meters were produced, as Gazprom’s gas exports to Europe declined after the outbreak of hostilities in Ukraine.

Gazprom’s production, as reported by the head of the company Alexei Miller at the end of December, decreased by 20% year-on-year, to 412.6 billion cubic meters. This was caused by a sharp drop in exports to Europe: first, Gazprom suspended deliveries through the Yamal-Europe gas pipeline, then through the Nord Stream, and exports through Ukraine remain rather scarce. The production of Gazprom Neft (Gazprom takes it into account in its statistics) in 2022 increased by 14.9%, to 50.5 billion cubic meters.

The largest gas producer after Gazprom, NOVATEK, increased production by 1.7% for the year, to 83.6 billion cubic meters. The increase in production occurred at the fields of the Yamal LNG project, as well as the North Russian cluster. LUKOIL reduced production by 0.8% to 20.64 billion cubic meters at the end of the year.

Rosneft, due to the launch of production at Rospan and Kharampur, increased production in Russia to 69 billion cubic meters in a year (by about 16%). These data do not take into account the company’s foreign projects, including the large Egyptian Zohr field, where in 2021 Rosneft’s share in production amounted to 5 billion cubic meters. With such an increase in production, Rosneft may no longer have to buy gas from Gazprom to supply its main client in the domestic market, Inter RAO (the head of the oil company, Igor Sechin, heads the board of directors of the energy company). Rosneft, according to the contract, must supply Inter RAO with up to 35 billion cubic meters of gas per year, but before that it was forced to purchase about 6-7 billion cubic meters of gas per year from Gazprom due to a shortage of its own production.

Gazprom’s production in 2023 may decrease by another 30-40 billion cubic meters, even taking into account the growth in supplies to China through the Power of Siberia, Kommersant’s interlocutors in the market believe. The trend to increase production by independent producers, in their opinion, will continue. The key question is exactly which fields Gazprom will reduce production in the future. Zapolyarnoye has traditionally been the main balancing field for the company. Now Gazprom is likely to further reduce production at the expense of dry Cenomanian gas from the main fields of Nadym-Pur-Taz – Zapolyarnoye, Urengoyskoye and Yamburgskoye, according to Kommersant’s interlocutors in the market. “The gas treatment system at these facilities is quite simple, therefore, it is possible to quickly adjust the production volume. It is more difficult to do this at condensate fields, ”explains one of Kommersant’s interlocutors. In addition, the Bovanenkovskoye field (which has wide MET benefits and a low transport tariff), whose gas flows through the northern transport corridor (ends with the Nord Stream system), will probably play a large role in balancing. The possibility of transferring this gas to the central part of the Russian Federation is limited, respectively, production on it may decline, Kommersant’s interlocutors believe.

Independent expert Alexander Sobko believes that it is too optimistic to expect a significant increase in domestic gas consumption, which could partially offset the decline in exports. Moreover, this year there may be difficulties with the export of methanol. Gazprom receives a double blow – not only are export supplies declining, but also in the stagnating domestic market, independent producers claim part of the demand. “Gradually, the gasification program can rectify the situation, but this is not a quick process,” concludes Mr. Sobko.

According to Vitaly Ermakov from the Higher School of Economics, as a result of the collapse in demand for Gazprom’s gas in Europe in 2022, the company’s free production capacity amounted to 110-120 billion cubic meters. “These are huge volumes, meaning lost profits of tens of billions of dollars and frozen investments,” he says. Gazprom faced this problem in 2015-2016, he recalls, when free capacity reached 150 billion cubic meters. Then, the expert notes, Gazprom balanced production using the Cenomanian deposits of the Nadym-Pur-Taz fields without loss for future production. According to the forecast of Mr. Ermakov, in 2023, a further drop in Gazprom’s production to a level of around 380 billion cubic meters, and then a slight increase, is very likely. “The Power of Siberia-2 project is of great importance for exports to China, since this is the only option to monetize idle production capacity by 2030. But here the decision depends more on China than on Russia,” he concludes.

Tatyana Dyatel