In the shadow of sanctions and a turbulent geopolitical landscape, Gazprom, Russia’s state-owned energy behemoth, faces a grim prognosis. The company, once the titan of gas exports, has had its fortunes drastically altered by the war in Ukraine.
A study commissioned by Gazprom and reported by a British newspaper suggests a decade-long recovery from the self-inflicted wound—with exports to Europe projected to remain a mere shadow of their former glory until at least 2035.
The war and subsequent sanctions have thrust Gazprom into a harsh reality; its exports to Europe are expected to average between 50 and 75 billion cubic meters per year by 2035, a steep decline to just a third of pre-war levels.
This stark outlook underscores the long-term impact of geopolitical strife on energy markets.
The Financial Times, reviewing the 151-page report, highlighted the stark admissions by Gazprom’s experts of the “contraction of export volumes” as one of the most candid acknowledgments of the sanctions’ impact on the Russian energy sector.
Gazprom, which disclosed a net loss of $6.9 billion in 2023—its first annual decline in over two decades—is now grappling with a future that looks increasingly dim.
With Europe pivoting away from Russian gas, the company’s role in the energy sector seems to be fading.
The firm’s traditional reliance on pipelines is being challenged by the growing market for liquified natural gas (LNG), signaling a strategic inflection point.
Yet, amidst this decline, Gazprom clings to a lifeline—the development of the Power of Siberia-2 pipeline.
The proposed pipeline, however, is mired in disagreements over pricing and supply.
The sanctions’ grip tightens further as Gazprom contends with the challenge of sourcing vital equipment, such as turbines for gas transportation, cut off from Western supplies.
The report notes that developing such technology domestically would be a colossal endeavor, both in time and finances, requiring five years and 100 billion rubles.
LNG presents a strategic alternative, and the report suggests a pivot towards this could be Gazprom’s best path forward.
However, the challenge is nontrivial; Gazprom lacks the technology to produce LNG on a larger scale, and diversifying away from pipeline exports requires a significant shift in both infrastructure and market approach.
The energy landscape is shifting under Gazprom’s feet, and the repercussions will be felt far beyond its corporate offices.