Gazprom Expects to Expand Influence on European Natural Gas Supply

[Asia Economy Reporter Minji Lee] Russian state-owned company Gazprom is expected to improve its performance due to increased demand for natural gas in Europe as the winter peak season approaches.

On the 12th, Hana Financial Investment stated, “As of last October, Europe’s natural gas storage was at 77%, falling short of the minimum capacity of 85% for the winter peak season,” adding, “As Russia’s influence on natural gas supply expands, performance is expected to improve further.”

Currently, natural gas inventories in Europe are at their lowest level in the past five years. Europe relies on Russia for 40% of its natural gas imports, with Gazprom supplying gas to storage facilities in Europe through pipelines. Jinwook Heo, a researcher at Samsung Securities, explained, “The natural gas shortage in Europe is analyzed to have occurred due to a combination of climate factors and a surge in Asian natural gas demand during the process of reducing dependence on traditional energy sources,” adding, “Especially this year, wind power generation fell short of expectations, leading to a relatively higher dependence on natural gas in Europe.”

Last month, Gazprom began supplying natural gas to five storage facilities in Europe via the Yamal and European pipelines. With Europe facing an energy shortage due to a surge in demand amid economic recovery after COVID-19, this development allows for securing gas storage ahead of winter.

Furthermore, if the Nord Stream 2 gas pipeline is approved, natural gas supply to Europe is expected to expand further. However, due to the suspension of the operating permit process for Nord Stream 2 in Germany, active supply expansion is unlikely in the near term. The suspension decision came amid cooling relations between Europe and Russia over the Ukraine and Belarus situations, causing natural gas benchmark prices to rise by about 15%. The period when natural gas prices stabilize is likely to be after March, when Nord Stream 2 becomes operational and seasonal heating demand decreases.

Meanwhile, Gazprom’s third-quarter sales reached 2.3732 trillion won, an increase of about 69.7% compared to the same period last year. Significant growth was confirmed in the gas and crude oil business sectors due to rising raw material prices. Although the increase in natural gas sales volume was limited, the sharp rise in sales prices drove growth. Jaeseon Yoo, a researcher at Hana Financial Investment, explained, “In the third quarter this year, gas production in the European region decreased by 0.4% year-on-year, and gas demand fell by 3.8%,” adding, “However, with LNG imports dropping by 10.1%, Gazprom’s PNG sales performance was able to defend against a significant decline.”

Sales of crude oil and petroleum products also improved significantly compared to the previous year due to rising oil prices. Although overall gas demand increased, supply to Europe decreased, resulting in total sales volume increasing by only 2.1% year-on-year. Sales prices showed a sharp rise centered on Europe, with Russia at 8.8%, Europe and others at 169.2%, and the FSU at 33.3%. Operating profit recorded 440.4 billion rubles, turning to a profit compared to the previous year. The gas sector turned to a profit with 141.2 billion rubles, and the refining and crude oil production sectors also achieved profit turnaround and increased earnings due to rising international oil prices.

This content was produced with the assistance of AI translation services.