After Years of EU War on Russian Gas Gazprom Selling More Gas to Europe Than Ever

by Nick Cunningham, Russia Insider:

Sabotaging South Stream, hobbling Nord Stream, writing regulation specifically aimed to frustrate Gazprom — it has all been in vain seeing EU’s own production is declining. Thankfully Russia is willing to make up the shortfall despite Brussels’ best attempt to cut off EU countries from affordable energy

Despite years of effort from the EU, Russia’s grip over natural gas supplies in Europe is tightening, not waning.

Gazprom shipped 190 billion cubic meters of natural gas to Europe in 2017—a record high, according to Bloomberg. In 2018, that figure is expected to dip slightly to 180 billion cubic meters, which will still be the second most on record.

The higher reliance on Russian gas may come as a surprise, not least because of the ongoing tension between Russia and some European countries on a variety of issues. Russia’s intervention in Ukraine and its annexation of Crimea in 2014 led to a standoff between Russia and the West—but Europe’s imports of Russian gas are up more than 25 percent since then, despite a lot of rhetoric in Brussels about diversification.

There has been some progress. U.S. LNG has begun arriving on European shores for the first time, promising to compete with Russian gas. Importing LNG has been a lifeline particularly in some areas that are acutely exposed to Russia’s gas grip. Lithuania began importing LNG, offering an alternative to Russian gas and forcing price concessions from Gazprom.

For years, U.S. LNG has been billed as somewhat of a game changer, threatening to end Russia’s control of the European market. There have been some notable concessions from Gazprom—more flexible pricing, for example, and an erosion of oil-indexed pricing—but the Russian gas giant has not lost market share. A lot of U.S. LNG has been shipped to Latin America, not Europe.

Part of the reason is that European natural gas production continues to fall, leaving a void that Russia has been eager to fill. At the same time, Gazprom’s Deputy Chief Executive Officer Alexander Medvedev told Bloomberg that coal prices are expected to rise a bit in 2018, making Russian gas more competitive.

Meanwhile, Russia is not leaving the LNG game to the Americans. Russian President Vladimir Putin recently inaugurated the start of the Yamal LNG project in Russia’s Arctic, a massive $27 billion LNG export terminal developed by private Russian gas company Novatek that was completed on time and on budget.

The global LNG market is dominated by Australia and Qatar, while the U.S. will increasingly grab market share as new terminals come online in the next few years. But Yamal LNG puts Russia on the map, and Russia is aiming to control 15 to 20 percent of the global market, according to the FT. “Starting from today, the number of people who have never heard of us will decrease dramatically,” Leonid Mikhelson, CEO of Novatek, said. “Russian gas will be marketable on the global arena.” Russia does export some LNG from Sakhalin in the Far East, but Yamal is positioned to service Europe as well as Asia.

The FT noted that the first shipment of LNG from Yamal was sent to the UK.

Then there is the Nord Stream 2 pipeline, a proposed project that will double the capacity of the existing line that runs from Russia to Germany via the Baltic Sea. The project is vociferously opposed by some Eastern European countries, as well as the United States, but it has the support of Germany. If completed, it will lock in even more market share for Russia.

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