Gazprom PJSC’s natural gas production has dropped 10.4% since January, dragged down by a steep cut in pipeline exports to Europe, which have fallen by 33.1% so far this year. The company has boosted exports to China. 

Russia produced 249.7 billion cubic meters (Bcm) between Jan. 1 and July 15, down by 29.1 Bcm compared to the same period last year, according to preliminary estimates released by the state-owned company this month. Gas exports to countries outside the former Soviet Union were 71.9 Bcm, or 35.6 Bcm less than the same period last year. 

“A 10% drop in production is quite stark. Provided Russia maintains its low pipeline deliveries to Europe and as domestic storage sites get filled, this could result in an acceleration,” Kpler energy analyst Laura Page told NGI.

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Gazprom’s production for the year is likely to continue to slide. The producer cut deliveries on the Nord Stream 1 pipeline to 20% of system capacity Wednesday to take another turbine offline for repairs. Russia has limited natural gas deliveries to Europe since last year and has stepped up those efforts in the face of Western sanctions for its war in Ukraine. 

Gazprom reduced pipeline exports through NS1 to 40% of capacity in June, blaming the cut on a piece of equipment that was stranded in Canada because of the sanctions. NS1 is one of the largest conduits moving natural gas into Europe, which relies on Russia for more than 40% of its natural gas supplies. Further cuts this week have sent European natural gas prices soaring. 

The European Union’s (EU) decision to curb natural gas consumption by 15% through next spring is likely to cut Russian gas imports further, said European energy analyst Ana Maria Jaller-Makarewicz, of the Institute for Energy Economics and Financial Analysis.

Russia’s 2021 gas production amounted to 762 Bcm. Gazprom’s 514.8 Bcm output accounted for nearly 68% of total Russian gas production, according to the International Energy Agency.

Russian energy minister Nikolai Shulginov said last week that total Russian gas production fell 5% year/year.

Gazprom deputy chief Vitaly Markelov had hinted at a production drop last April, when he told a Gazprom internal newspaper that Russian output was likely to fall 4% this year. Markelov said Gazprom expected production to fall to 494.4 Bcm, or the lowest level since 2017.

Russia’s cumulative loss in gas production from 2022 to 2025 could total more than 480 Bcm amid sanctions and the EU’s decision to phase out Russian gas, the IEA noted in its latest quarterly Gas Market Report. The IEA predicts a loss of nearly 550 Bcm of gas between 2022 and 2025 if Europe phases out Russian imports at a fast pace.

However, independent gas producer PAO Novatek and state-controlled PJSC Rosneft Oil Co., the second and third largest gas producers in Russia, reported increases for first half 2022 production of 40.2 Bcm and 22.7 Bcm, respectively. Novatek’s gain was attributed to an increase in exports from its Yamal LNG export plant in Russia’s Far North.

China Exports on the Rise

Gas exports via the Power of Siberia gas pipeline have increased under a 30-year supply contract between Gazprom and China National Petroleum Corp. (CNPC). Gazprom said earlier this month that a new record was reached for daily pipeline volumes to China with “volumes  delivered in excess of daily contract quantities.”

Wood Mackenzie also noted recently that China’s pipeline imports increased by 11% in the first half of this year, while its liquefied natural gas imports have fallen by 21% year/year.

“Russian gas pipeline exports to China could increase in the future, but it will depend on China’s economic situation, which continues to be affected by the Covid-19 pandemic and also by the capacity of the pipeline,” Jaller-Makarewicz told NGI.

She noted that the Power of Siberia is the only gas pipeline between Russia and China. It has an annual capacity of 38 Bcm. This value is much lower than the total pipeline capacities between Russia and Europe, which far exceed 200 Bcm annually.

Construction for the 50 Bcm/year Power of Siberia 2 pipeline is expected to start in 2024. The 1,600-mile pipeline route would stretch from Yamal in Western Siberia to northern China. It is expected to enter service in 2030, although Moscow is pushing for an earlier start-up date as Russia looks to diversify its energy consumers.  Western Siberia fields are currently the source for gas deliveries to Europe.

Jamison Cocklin contributed to this story