Russia’s War in Ukraine Has Hit Gazprom’s Revenues Hard

Putin’s invasion of Ukraine has badly hurt the gas sales and market share of Russian giant Gazprom, which may not recover lost sales volumes and revenues for more than a decade, or ever, according to a third-party report commissioned by Gazprom’s executives and reported by the Financial Times on Wednesday.    

Gazprom’s lost sales volumes may never recover, while export routes to China will not be able to offset the lost European market, the report written in late 2023 says.

“The main consequences of sanctions for Gazprom and the energy industry are the contraction of export volumes, which will be restored to their 2020 level no earlier than in 2035,” FT quoted the authors of the report as saying in the 151-page document. 

Gazprom doesn’t have its own tried-and-tested technology for large-scale LNG production, therefore its role in pipeline gas exports is declining, and “Gazprom’s role in the gas industry is accordingly expected to decrease,” the report says.

Russia and Gazprom are betting on increased pipeline gas sales to China, but negotiations on a second pipeline link haven’t progressed much, mainly due to disagreements over the price at which Russia would sell its gas to Beijing.

According to the report commissioned by Gazprom’s management, the Russian giant will see its market and influence shrink.

One way to keep the dominant position on the domestic market is for Gazprom to seek preferential treatment from the Kremlin. The company should also look to exploit its monopoly over Russia’s infrastructure for natural gas transportation, the authors of the report note. 

Russia has seen its gas exports to Europe significantly reduced since the invasion of Ukraine.

Before the war, Russia supplied around one-third of all the gas to Europe.

Last year, Gazprom’s pipeline gas exports to Europe slumped by 55.6% compared to 2022.

As a result, Gazprom booked its first annual net loss in 23 years for 2023, signaling a significant shift in financial performance attributed to dwindling gas shipments to Europe and pricing pressures.  

By Tsvetana Paraskova for Oilprice.com

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