Gazprom may have to close its gas fields if it is unable to divert supplies toward China.
Gazprom, Russia’s largest state gas company, has seen production drop as it tries to find buyers.
According to the company, its production for this year has fallen by 41.7 billion cubic meters (bcm), to 274.8bcm. This was 13.2pc more than in the same period last.
Over the same period, its exports to countries other than the Soviet Union decreased by 44.6bcm (or 36pc).
Russia is accused of limiting gas supplies to Europe, as it uses energy to wage war on Ukraine.
It is reduced flows through the Nord Stream 1 pipeline from Germany to Germany to 20pc. This is due to missing equipment due to Sanctions.
Gazprom has spoken up about its increasing exports to China through the Power of Siberia pipeline. This pipeline sends gas from Russia’s east to China.
However, China’s exports are still relatively small in comparison to Russia’s regular exports to Europe.
China is expected to send approximately 15 billion dollars to Russia this year, compared with the 200 billion euros sent each year from Europe. However, Chinese exports will increase in the coming years.
According to Tom Marzec Manser, head, of gas analytics, and market specialists ICIS, the European fields that supply Europe are not connected to China. This means supplies cannot be diverted to Europe.
Russia could have to close down its gas fields if it is unable to sell the gas. This may impact future production.
According to ICIS figures, the August production was 36 percent lower than the same two weeks last year.
The output since June was also lower than that in 2020 because of the pandemic.
After warnings by the International Energy Agency last Wednesday that Western sanctions against Russia had only a “limited effect” on Russia’s oil production, the slump in gas production has occurred.
According to the IEA, demand has increased in India and China, while exports to the US and Europe have dropped. This helps reduce the financial impact of the sanctions against the Kremlin.
Russia’s July oil production was 3 percent below its pre-war levels.
Falling Russian gas exports have pushed gas prices to record levels in Europe and the UK, leading to a major crisis in living standards and an increase in inflation.
This has also reduced Russia’s financial impact, as higher prices compensate for the loss of volumes.
Gazprom issued a stark warning yesterday that gas prices in Europe could rise to $4,000 per 1,000 cubic meters this winter. This would translate into EUR372 per megawatt-hour, or about 40 percent higher than current high prices.
