Why Isn’t Russia Sending More Gas To Europe?
- Gazprom has not booked any extra space on pipelines going through Ukraine after an auction held on Monday
- Gazprom data shows that exports for the first half of October were lower than those for the first half of September
- Europe's gas woes don't seem to be top of the priority list for Moscow, and the reason may not be just geopolitical
After last week President Vladimir Putin said Russia could send more gas to Europe to alleviate a perceived shortage that has pushed prices to record highs, Gazprom has yet to book additional pipeline space, and prices are climbing again.
Bloomberg reports that Gazprom has not booked any extra space on pipelines going through Ukraine after an auction held on Monday. The total space offered was 15 million cu m daily on two pipelines.
According to the report, the state gas giant has also not booked any pipeline capacity for November. Also, based on preliminary operating figures from Gazprom, Bloomberg said it had calculated that its average daily exports this month, at 427 million cu m, were 12 percent lower than the average for September.
The only relevant update on Gazprom's production and exports available on the company's website showed figures for the period January to mid-October, for which production totaled 399.4 billion cu m. The state giant also reported a 13.1-percent increase in gas exports to countries outside the former Soviet Union for the period, including a 28.2-percent increase in exports to Germany and a 10-percent increase in exports to Poland.
Meanwhile, Reuters reported that Gazprom had booked about a third of the free pipeline capacity along the Yamal-Europe pipeline, which passes through Poland, for next month. This is equal to 32 million cu m of gas daily. The Reuters report also cited Gazprom data showing exports for the first half of October were lower than those for the first half of September.
Europe's gas woes don't seem to be top of the priority list for Moscow, and the reason may not be just geopolitical. Domestic consumption is also high, and it is domestic supply that Gazprom is prioritizing, deputy Prime Minister and former Energy Minister Alexander Novak said last week.
"I want to underline that we in Russia have record high gas consumption figures this year, which is also due to active economic recovery," Novak said in an interview for Rossiya 1, as quoted by Reuters.
In another interview, for news outlet Business FM, Novak said that filling up domestic reserves and securing domestic supply was the priority over more exports for Europe. He also said, however, that there was no actual gas shortage in Europe, while acknowledging the lower than normal levels of gas in storage.
"The problem is related to the fact that gas in storage is at the lowest level for the last five years, at 74 percent, versus the usual 85-90 percent," Novak told Business FM. "This, of course, causes worry among market participants and as a result, as usual, prices go higher."
As for why Russia wasn't supplying more gas via the spot market, Novak listed higher domestic consumption as one reason, noting the lower output of electricity from hydropower stations, the earlier start of heating season, and the filling of domestic storage.
According to many, the reason Gazprom is taking its time with additional supplies is because of Nord Stream 2. The new pipeline is awaiting the final approval of the German authorities to start commercial operation.
"Gazprom is undoubtedly assuming that Nord Stream 2 will be approved in the relatively near future, and positioning itself accordingly," Ron Smith, executive director of Moscow-based BCS Global Markets, told the Financial Times this week, after gas princes in Europe rose 18 percent following the latest gas auctions.
Nord Stream 2 aside, Russia is also prioritizing its long-term contracts, too, the FT reported, citing analysts. Until it made sure commitments on these contracts were fulfilled, it was unlikely to make additional gas available.