BAKU, Azerbaijan, March 26. The future trajectory of Russian gas production will be primarily dictated by market demand rather than resource availability, the Oxford Institute of Energy Studies (OIES) says in its comprehensive analysis, Trend reports.
Notably, the aftermath of the Ukraine war has led to a decline in Gazprom's sales to Europe, resulting in significant spare capacity within the industry.
Gazprom, alongside other major Russian gas producers such as Novatek and Rosneft, is expected to manage its production to meet the growing domestic demand in Russia, as well as pipeline sales to Europe, countries in the Former Soviet Union (FSU) like Belarus and Moldova, expanding pipeline exports to China, and the planned increase in liquefied natural gas (LNG) exports to the global market.
The OIES suggests that a reasonable estimate of future Russian gas demand could align slightly below GDP growth rates, accounting for increased efficiency measures. For instance, a projected annual growth rate of 0.8% would result in domestic gas demand reaching 515 billion cubic meters (bcm) by 2030.
With this stable foundation expected to persist, any fluctuations in Russian gas production are likely to be driven by export sales. However, the report highlights potential risks associated with export routes, particularly concerning flows through Ukraine.
Given ongoing military activities, there remains a looming threat of interruptions to gas flows through Ukraine. Compounding this uncertainty, the transit contract obliging Russia to transport 40 billion cubic meters per annum (bcma) via the Ukrainian system to Europe expires at the end of 2024. The current underutilization of this capacity has already led to disputes, with the Ukraine system operator suing Gazprom for underpayment.
Looking ahead, the Ukrainian government has indicated reluctance to renew the contract beyond 2024, raising concerns that flows through the Ukraine system could cease altogether. While a resolution to the conflict that could potentially restore Russian flows to contracted levels remains uncertain, analysts view such a scenario as improbable in the short term, emphasizing the speculative nature of any estimates.
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