Narrowing Gazprom’s 2023/2024 exports range
Narrowing Gazprom’s 2023/2024 exports range
Since November 2022, we assumed Russian pipe flows to stay between 0.9bn m3/m (TurkStream only as Russia has little incentive to fully cut off Europe) to 4.5bn m3/month (TurkStream and the Ukrainian route at contracted capacity). As Ukrainian flows never reached more than 2bn m3/m since November 2022, we can now safely narrow the range to 0.9 to 3.3bn m3/m until the end of 2024.
Gazprom's Europe Monthly Exports
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Source: Gazprom, Entsoq, thierrybros.com
With 2.4bn m3/m exported in July 2023 vs 3.6bn m3/m exported in July 2022, the drop y-o-y is 34% but volumes are up 29% vs June 2023.
Split of Gazprom's Europe Monthly Exports
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Source: Gazprom, GTSOU, Entsoq, thierrybros.com
Contrary to the EU Commission narrative, the EU has not massively reduced its Russian gas dependency. Gazprom reduced its exports that used to represent 40% of EU demand in 2019 to 7% now, but the market is using Russian LNG to mitigate this. With Russian LNG accounting for more than 50% of total Russian gas supply, EU is still 15% dependant on Russia. As Russia is the 4th largest LNG exporter, it could inflict more pain on EU by weaponising LNG going forward instead of pipe gas used in 2021 and 2022.
Russia's Gas Europe Exports
Source: thierrybros.com
As the Ukrainian transit contract is ending on December 31, 2024, we do not expect any fruitful renegotiations and we shoud expect the range to stay in the historical range of the TurkStream flow (from a minimum 0.7bn m3/m to the designed 1.3bn m3/m capacity). If we assume flows to stay at around 2bn m3/m until end 2024 and then at around 1bn m3/m from 2025, we have to consider a further drop of 12bn m3/year from 2023 to 2025, at a time new LNG supply won’t yet be available. Gazprom’s supplies to Europe are declining but are still badly needed.
Gazprom's Europe Yearly Exports
Source: Gazprom, Entsoq, thierrybros.com
April send-outs were at an all time high with a maximum daily recorded on April 20. In July, send-out was for the first time in 2023 down vs last year (-6%). Since June 2023, China is back on the LNG market with intakes 25% above last year. In this new world, sub $10/mn Btu looks cheap and even provides opportunities for Asian buyers to come back.
EU (excl. Malta) LNG send-out
Source: GIE, thierrybros.com
EU Storage
Source: GIE, thierrybros.com
Since July 28, EU storage level is now back above historical range. With 86% full at end July, we should now continue to hit record daily levels. But even with storage aiming at the same record level as end of last summer, prices should not materially drop as any sub-$10/mn Btu is now viewed in Asia as a buying opportunity.
Dr. Thierry Bros
Energy Expert & Professor
August 1, 2023
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