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Oil & Gas

Gazprom directors take Europe off its list of targeted markets

The board of Russia’s Gazprom has rubber-stamped a decision to drop Europe from the company’s list of “destination” markets over the next decade in an updated version of the company’s mid-term development strategy.

The state-controlled gas giant said in its regulatory disclosure notice that the 11-member board of directors, headed by Viktor Zubkov, unanimously voted to remove any reference to achieving and maintaining “a target market share on the European gas market” from the paper.

The updated strategy document covers 2024 to 2033, the company said in the filing.

Gazprom estimated it supplied almost 40% of European gas imports in 2021 before Russia’s invasion of Ukraine last year and the subsequent closures of the Yamal Pipeline, from Belarus to Poland and Germany, and the Nord Stream 1 subsea line to Germany.

Directors also instructed Gazprom to work on measures to improve the availability and supplies of natural gas for Russian consumers during the autumn and winter, and update the 10-year strategy with these targets.

Gazprom is understood to have lost over 100 billion cubic metres of gas production last year after its decision to halt export supplies to Europe, with its total output declining to 413 Bcm in 2022 against 515 Bcm in 2021.

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Although the company has not yet disclosed production figures for this year, reports in Moscow have suggested that gas output continues to decline along with demand for Russian pipeline gas in Europe, where liquefied natural gas cargoes are taking up much of the slack.

Ukraine transit in doubt

Gazprom continues to supply 40 million to 42 million cubic metres of gas per day via Ukraine, well below the contracted minimal volume of almost 110 MMcmd, with current Russian gas shipments being delivered to Ukraine’s neighbours Moldova, Slovakia, Austria and Italy.

However, the company’s existing transit agreement with Ukraine expires at the end of 2024.

Ukraine’s Energy Minister German Galuschenko suggested at a conference in London earlier this week that negotiating and signing a new transit agreement with Gazprom could be problematic because of the ongoing war and expected sanctions on Russian pipeline gas imports.

Last year, Russian military seized one of the two gas pipeline metering and pumping stations on the country’s border with Ukraine. When Ukraine declared force majeure after losing control of the station, Gazprom refused to increase gas transit flows to an alternate Ukrainian station despite the facility’s ample free throughput capacity.

Russian gas transit flows are “no longer a necessary condition for Ukraine’s gas transmission network to operate properly”, Sergiy Makogon, an independent adviser and former head of Operator GTS Ukrainy, told Upstream.

The operator has been preparing for a Russian gas transit halt since 2019, he said.

“The pipeline network is now ready to operate in reverse mode”, pumping gas from European markets from the west to the east of the country.

“I do not see any technical risks,” Makogon said.

Sweet proposals for Africa

With Europe spurning Russian imports, reports in Moscow suggest that Gazprom has stepped up efforts to tap alternative markets in Africa, following talks to increase pipeline gas exports to China, Uzbekistan, Kazakhstan and Pakistan.

Moscow-based news agency Interfax said that Gazprom had sponsored a roundtable discussion earlier this week in Johannesburg, South Africa, seeking to raise interest from a group of African states in possible co-operation on LNG projects and the construction of regional gas pipelines.

The discussion included representatives from South Africa, Algeria, Angola, Ghana, Egypt, Kenya, Mozambique, Nigeria and Tanzania.

However, the meeting in Johannesburg has been ignored by Namibia, where Gazprom divested its 54% shareholding in Namibia’s Kudu offshore block in 2011, dashing the hopes of Namibian authorities that the Russian company would be a force to push forward exploration and development of this highly promising acreage.

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