Watch out for further gas and geopolitics in 2024

In October, the populist pro-Moscow party led by former Prime Minister Robert Fico won Slovakia's parliamentary election; he is now back in government. This could change Slovakia’s strategy to access Russian gas after the end of the transit contract via Ukraine. With no transit via Ukraine post-2025, Slovakia should be cut off Russian gas as it has no alternative route. To avoid this and keep accessing cheap Russian gas, the Slovak government could try to negotiate with Russia a long-term supply contract with Gazprom gas to be delivered at the Russian-Ukrainian border and then book the transport capacity itself in Ukraine. 

A strong Gazprom has always delivered its gas in the final EU consumption country to avoid inter-EU increased competition but a weakened Gazprom that is in desperate need to stay profitable¹ could be forced to accept this only option to sell an additional² 5 bcm/y. Ukraine and the EU would then be in an awkward position as both always wanted Russian gas to be sold at the Russian border and not inside the EU. Expect tough negotiations to start in mid-2024!

With 2.5 bcm exported in October 2023 vs 2.1 bcm exported in September 2022, for the second month in a row Gazprom’s exports to Europe are up y-o-y (+18%).

Gazprom's Europe Monthly Exports

Source: Gazprom, Entsog, thierrybros.com

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As forecasted³ back in 2022, Gazprom’s exports flows narrow⁴ range stays between 0.9 and 3.3 bcm/month.

Split of Gazprom's Europe Monthly Exports

Source: Gazprom, GTSOU, Entsog, thierrybros.com

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April send-outs were at an all time high with a maximum daily recorded on 20 April. Since July, LNG send-out is down vs last year as Asia is back on the LNG market.

Source: GIE, thierrybros.com

EU Storage

Source: GIE, thierrybros.com

Since 10 October, EU storage is above historical range. With 99% full at end October, a new all-time high has been reached. This is very good news ahead of a winter that hasn't started yet and in front of major political uncertainties. But with Portugal, Romania and Spain above 100%, the EU Commission should request gas storage operators to revise up their effective working gas capacity as this would mean more gas to be effectively stored ahead of next winter with the EU regulation requesting at minimum 90% full on 1 November.

 

Dr. Thierry Bros

Energy Expert & Professor

November 1, 2023

[1] As explained in Russian gas supply decline continues through October (naturalgasworld.com)

[2] As explained in Narrowing Gazprom’s 2023/2024 exports range (naturalgasworld.com)

[3] To stay profitable, Gazprom must sell more than $21bn/quarter

[4] Slovakia 2022 gas consumption according to EI Statistical Review