The current situation and long-term prospects of Gazprom

Alexey Belogoryev, Research and Development Director of the Institute for Energy and Finance, commented on the Gazprom current situation and long-term prospects to InfoTEK.

Alexey Belogoryev believes that first it is necessary to come to terms with the fact that within the current business structure, the holding will never return to its usual over-profitability until 2022. In his opinion, Gazprom has moved into the category of companies with average profitability, and in some years even below average.

The main long-term risk, according to the expert, is the expected decline in world gas prices in the second half of the 2020s due to the LNG excess supply forming by the end of 2025.

"For this reason, the growth of physical exports, alas, does not mean an increase in value," he added.

"It is worth remembering that Russia has a huge unrealized potential to reduce gas consumption, which at some point will still be used. But, apparently, not in the 2020s. Therefore, by 2030, domestic demand may increase by 30-40 billion cubic meters in 2023. But not all of this volume will be accounted for by Gazprom's supplies. And this does not compensate for the loss of about 90 billion cubic meters of pipeline exports by 2030 compared to the average annual level of 2017-2021," Belogoryev said.

Wholesale gas prices in Russia have been fluctuating for many years (taking into account exchange rate changes) about $70 per thousand cubic meters. For comparison, the average export price of pipeline gas from Russia in 2024 (after a sharp drop in prices) will probably be about $270, Belogoryev predicts.

In order for supplies to the domestic market to be able to compensate Gazprom for the cost losses from a decrease in exports, it would require a sharp increase in domestic prices, which was discussed so much and for a long time back in the late 2000s. Given the special role of gas in the energy balance and in the economy, the state is unlikely to decide on such a step, concluded Belogoryev.