Gazprom non-FSU gas supplies see over 40% slide year to date
Gas deliveries by Gazprom to countries outside the former Soviet Union were down 41.1% in the first nine and a half months of this year compared with the same period in 2021, coming in at only 89.3bn m3, amid increasing cuts in flow to European buyers.
In a statement on October 17, Gazprom insisted it "delivers gas in compliance with confirmed requests." However, the company has in recent months had to declare force majeure on supplies to some customers because of reduction in flow via the Nord Stream 1, and the pipeline's eventual closure at the end of August. Earlier this year Russia also cut off gas to buyers that refused to comply with Moscow's demand for payment in rubles.
Remaining Russian pipelines
A series of major leaks that occurred in late September, widely suspected to have been caused by sabotage, have rendered the 55bn m3/year Nord Stream 1 inoperable, at least for this winter. Meanwhile, sanctions and counter-sanctions that Poland and Russia have slapped on each other have also prevent eastward deliveries via the 33bn m3/yr Yamal-Europe pipeline. That leaves only the 31.5bn m3/year TurkStream, whose two strings serve Turkey and southeast and central Europe respectively, and the Ukrainian transit system.
Nominally capable of delivering upwards of 100bn m3/yr of Russian gas to Europe, the capacity of the Ukrainian transit system was restricted in May when Ukrainian pipeline operator GTSOU declared a force majeure on accepting gas from one of two border points, accusing Russian proxies of syphoning off some of the supply. Ukraine claims that the remaining Sudzha border point can provide 244mn m3/day of gas, even though it was only handling under 35-36mn m3/d as of last week.
Ukrainian transit is also at risk because of a new payment dispute between Moscow and Kyiv.
Russia has proposed sending extra gas to Germany via the undamaged one of the 55bn m3/yr Nord Stream 2's two strings, but this would require the pipeline to be certified for operation – a process that Berlin halted in late February in response to Moscow's actions in Ukraine. More recently, Russia has talked up prospects for establishing Turkey as a hub for its gas. This plan could involve doubling the capacity of the TurkStream pipeline to 63bn m3/yr.
European gas prices continue to slide
European gas prices, while still uncomfortably high for consumers, have seen fairly steady decline since soaring to an all-time high in late August, as LNG supply remains stable and European storage facilities near full capacity. The November contract at the Dutch TTF gas hub is currently trading at €115.7/MWh, down nearly 10% on the previous trading session level, and down two thirds from a spike of €350/MWh on August 26.
The December, January, February and Q1 2023 contracts at TTF are notably priced higher, and close to €150/MWh, amid concerns about winter scarcity of gas.
Chinese ambitions
In its statement, Gazprom also noted that deliveries to customers in Russia were down 4.1% in the January 1-October 15 period, while supplies to China via the Power of Siberia pipeline continue to grow. Russia aims to connect up a new field to the pipeline, Kovyktinskoye, by the end of this year. Supplies are expected to reach 22bn m3 in 2023, up from 15bn m3 in 2022, Russian deputy prime minister Alexander Novak said last week at a forum in Moscow.
Power of Siberia should be flowing at its full capacity of 38bn m3/yr by 2027, Novak said. This is notably two years later than was envisaged when the pipeline was launched at the end of 2019.
Russia's ambition is to send an additional 6bn m3/yr via Power of Siberia once upgrades are made, and deliver a further 10bn m3/yr of gas to China via a yet-to-be-built pipeline in the Far East. Moscow is also negotiating with Beijing on the construction of a 50bn m3/yr pipeline from the Arctic to China through Mongolia, but a sales contract is not yet in place to underpin the project.