While gas output has plummeted to Europe, Russia is courting Asian markets
While gas output has plummeted to Europe, Russia is courting Asian markets

Russian gas output ‘to grow to 850 bcm by 2035’

Russian gas output could grow by another 150 bcm to 850 bcm by 2035, according to The Oxford Institute for Energy Studies (OIES) research.

Despite the current ‘stagnant’ economic picture, the economic support from oil and gas means the outlook is ‘not disastrous’.

The OIES forecasts increased growth if the country’s pivot to Asia is successful, and volumes may rise as high as 900 bcm if sales rebound to Europe in a post-Ukraine war scenario.

China could be importing as much as much as 100 bcm a year of Russian pipeline gas in the 2030s, and the use of Russian LNG technology and support from Asian customers could see sales double by 2030 under a benign scenario.

Flows to Europe – where export sales have plummeted 80% since February 2022 due to sanctions and contractual disputes – seem very unlikely to return to previous levels and a 50% rebound may be optimistic.

However, even a pessimistic outlook forecasts production remaining at 700 bcm a year.

Russia’s national gas output in 2022 amounted to 672.6 bcm, down 11.8% year-on-year, and output continued to fall to 638 bcm last year with Gazprom contributing 404 bcm.

The pivotal energy company will continue to play a dominant role – especially as it has significant spare capacity as a result of the decline in export sales – although its position has been somewhat undermined by the rise of independent producers and emergence of Novatek as Russia’s primary producer of LNG with the former benefiting from the launch of a number of much-delayed upstream projects.

While oil and gas exports remain central to the Russian economy, its future as a gas exporter is much more uncertain since the war began.

Alongside key Asian markets, Russia is looking at setting up a ‘gas hub’ in Turkey, where it could sell to Europe a mix of Russian, Azeri and Iranian gas, as well as domestic gas once production at the Sakarya field starts this year, and also a ‘gas union’ with Kazakhstan and Uzbekistan.

Price discounts may continue to be applied, from China and the above mentioned partners, which will reduce revenues but unlikely to cause the country to collapse economically. Russia remains the world’s second largest producer of fertilisers.

The findings are likely to send shockwaves in Europe, indicating resilience to the Russian economy and sanctions, despite the protracted war.

“It is apparent that the future of Russian gas production will not be driven by resource availability but by market demand for Russian gas. The overall conclusion is that Russia does not seem to be on the verge of collapse under any scenario that does not involve a dramatic fall in the oil price,” it concludes.

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