Russia reached the bottom in terms of gas production and export in 2023

Alexey Belogoryev, Research and Development Director of the Institute for Energy and Finance, commented on the results for the Russian gas industry in 2023 to the Neft and Capital magazine.

Alexey Belogoryev noted that this year the Russian Federation has reached the "bottom" in gas production and export. A smooth recovery should begin in 2024, but not as much as we would like.

"The main driver of growth is the Power of Siberia, gas supplies to Kazakhstan and Uzbekistan for transit to China. With LNG, everything is more complicated. By the end of this year, problems were discovered at Arctic LNG 2. Because of this, the expectation of an increase in LNG exports from Russia by 18% in 2024 is under threat. In 2023, the supply of liquefied natural gas from Russia decreased in the II and III quarters, and recovered only in the IV, and the previous failures in volume in kind were not compensated. Arctic LNG 2 will most likely be launched on time, but reaching its design capacity may clearly not be in time by the end of 2024," the expert says.

The analyst believes that the prospects for Russian gas in the European market are ephemeral. By the end of 2023, exports from Russia to the region will amount to about 21-25.5 billion cubic meters per year. This is almost 3 times less than in 2022 and 7 times less than in 2021. It is quite acceptable that the EU will continue to reduce purchases, bringing them to 10-15 billion in 2030, and even to zero in a couple of years. Supplies to Turkey decreased significantly in the first half of 2023, growth began in August, but the results of the fourth quarter are still unknown.

In the domestic market of Russia, there is a threat of higher gas prices due to a reduction in export profits. The growth of demand in the country itself can be provided by the gasification of regions and transport, but this does not fully compensate for export revenues in previous years. So far, price increases are not critical, even for industry, but Gazprom insists on "advancing" the process.

"The key issue for the coming years is how to provide the gas industry with sufficient investments in the face of falling export revenues, maintain the financial attractiveness of new projects and equalize budget profitability through LNG exports, the profit from which will be clearly lower than from pipeline supplies in previous years," Belogoryev concluded.