Gazprom pipelines and export capacity

Газопроводы Газпрома и экспортные мощности

Gas pipelines of West Siberia

Газопроводы Западной Сибири

Export flows of Gazprom

Экспортные потоки

Spot, Gazprom, Brent

Цены на нефть и газ

End-use price of gas

Russia and USA

Daily gas production

Суточная добыча

Gazprom Reduces European Gas Import Forecast

Gazprom has significantly reduced its projections of European gas demand in 2020-2030. According to the South Stream booklet of Gazprom Export, "Europe's annual natural gas import requirements will grow by 70-100 bcm by 2020". In November 2008, Alexander Medvedev, head of Gazprom Export, estimated the 2020 demand for new pipeline gas from Russia alone at 65-105 bcm (excluding gas from other exporting countries).

Note that according to the International Energy Agency (IEA), in January-May 2009, OECD Europe and Turkey imported 27 bcm of gas less than in the same period of 2008. Imports from Russia dropped by 23.1 bcm, but in the same time imports from Norway, Qatar, Iran, Trinidad and Azerbaijan increased by 9.5 bcm.

The reduction of the future European demand accompanied by the growing "gas independence" of the US leads to an increasing competition between pipeline gas and LNG in the European markets. From the standpoint of investors, Qatari LNG is a way more attractive than pipeline gas from Russia. Per 1 bcm/year, the capital cost of the Qatari gas chain from gas well to the European gas transmission pipeline (production, LNG plant, tankers, LNG import terminal) is three times lower than the investment cost of the production-transmission chain from the Yamal peninsula to the Black Sea and the South Stream pipeline. Investment cost of projects for production and delivery of Azeri, Turkmen and North African gas to Europe is also much lower than that of Yamal and Shtokman.

Most likely, major share of the new (or incremental) gas market in Europe will be divided without Gazprom's participation. If the EU succeeds in fulfilling just a third of its Energy Security and Solidarity Action Plan, then there will be no space left for Gazprom. It means that the new export pipelines of Gazprom will not increase gas export volumes and will not generate additional profits.

The reduction of the future gas demand in Europe leaves just one option for Turkmenistan to export gas to European markets - via the Nabucco pipeline. Gazprom is very unlikely to reduce its own exports to re-export Turkmen gas at no profit. On the other hand, Turkmenistan will not agree to sell gas at the domestic price of the Russian Federation.

Despite the reduction of European market forecast, Gazprom still plans to commission the Nord Stream (capacity 55 bcm/year) and South Stream (63 bcm/year) pipelines by 2015. Gazprom Export claims that "South Stream and Nabucco are neither competitors nor mutually exclusive pipeline projects. Projections show that Europe will need more additional gas than the combined capacity of South Stream, Nabucco and Nord Stream" (South Stream booklet).

In fact, the 118 bcm/year of combined capacity of the two Russian projects exceeds the total projected European demand for additional imports in 2020. Gazprom estimates the 2030 import deficit in Europe at 205 bcm, which is higher than maximum projections of IEA and EIA. Apparently, Gazprom's booklet is a message that the Nabucco pipeline is not needed until about 2025.

It is worth noting that in 2008 Ukraine shipped 117 bcm of Russian gas to Europe. In my view, it is not just a coincidence that the combined capacity of the two "diversification pipelines" of Gazprom matches the volume of gas transit via Ukraine.

Mikhail Korchemkin

August 21, 2009

Last modified: 12/07/14                    East European Gas Analysis 2006-2014                                           Email:
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