Do future Russian gas pipeline exports to Europe matter anymore?

During 2022, a key concern within the EU and the global gas market was how the market might cope with a complete shut-off of Russian gas pipeline exports to Europe if a ban was implemented on Gazprom sales. For most of the year, it appeared that the market was very stretched and that gas demand rationing in Europe might be needed if Russian gas disappeared completely or if a cold winter caused a spike in demand. In addition, the economic impact of higher gas prices, which peaked at over $90/mmbtu in August 2022 and averaged over $40/mmbtu for the year as a whole, also prompted the question as to whether European politicians and companies might be tempted to concede to some of Gazprom’s demands (for example on rouble payments) in order to increase imports and lower prices. The politics of the situation suggested that while the Ukraine war continued this would not be an acceptable outcome, but questions were being asked about how long the EU, or individual member states, would be prepared to take the economic pain. Six months into 2023, a completely different set of questions can now be asked: is Russian gas that important to the EU and wider Europe anymore? Would it matter if volumes went to zero sooner rather than later, either by Russian or EU design? Will Russian gas ever have a significant role in western markets again? This Energy Insight investigates these questions, looking at available infrastructure for Russian exports, the relevance of Gazprom’s long-term contracts with European customers, the importance of Russian LNG and also whether the removal of all pipeline exports from Russia, or their gradual recovery, would have much impact on European and global gas prices.

By: James Henderson , Kong Chyong