BOFIT Weekly Review 2015/20
Exports of Russian pipeline gas down over 10 % last year
The Central Bank of Russia reports that about 175 billion m3 of natural gas were exported last year. Exports to Ukraine were down significantly, falling by 44 % to 15 billion m3. Exports to Europe and Turkey declined by 9 % to 126 billion m3. In addition, Gazprom’s pipeline grid transmitted 20–30 billion m3 of gas to Europe from Central Asian countries (mainly Kazakhstan, Turkmenistan and Uzbekistan). Gazprom said that last year it sold 147 billion m3 of gas to European and Turkish markets.
There are four main pipeline routes for exported gas: Nord Stream, which runs along the Baltic Sea bottom; Blue Stream, which passes under the Black Sea to Turkey; the Yamal-Europe pipeline through Belarus; and the Druzhba pipeline that goes through Ukraine. Druzhba is by far the biggest and most important of these four pipelines, with about half of the gas piped to the EU moving through it.
Gazprom has long sought to circumvent transmission routes through Ukraine. The South Stream pipeline, the brainchild of a consortium led by Gazprom, would run under the Black Sea to Bulgaria. The project was abandoned, however, in December 2014, largely on opposition from the EU. In response, Gazprom announced it was planning a similar pipeline to run under the Black Sea to Turkey that would stream gas to the markets in both Turkey and the EU. This “Turkish Stream” project is pending final approval from the countries involved.
In September 2014, construction of the first gas pipeline to Asian markets was officially christened. A year ago, Gazprom and China’s CNPC concluded a 30-year gas supply agreement that provides China with 38 billion m3 of gas delivered every year. The “Power of Siberia” pipeline should be operational in 2019.
The required investment in the Power of Siberia pipeline and development of gas fields in Yakutia and Irkutsk in eastern Siberia are huge, both in terms of scale and cost. Russia has long sought agreement from China on a more western route that could stream gas from existing fields in western Siberia. In conjunction with the Moscow visit of Chinese president Xi Jinping, Gazprom and CNPC agreed on May 8 to go ahead with construction of this Altai pipeline. No details on the agreement have yet been released.