Gazprom, the giant in Russian natural gas production, saw its output plummet to historic lows last year due to ongoing effects from the Ukraine conflict.
Once holding the throne as the world’s largest publicly-traded natural gas company until 2023, Gazprom suffered significant setbacks following Russia‘s invasion of Ukraine under Vladimir Putin. The company recently reported its first annual losses in 25 years.
The latest annual report revealed a staggering 13% drop in natural gas production, down to 359 billion cubic meters (bcm) from the previous year’s 412.94 bcm and a drastic 33% decline from the 515 bcm in 2021, pre-conflict.
With production dipping to levels last seen in 1989, Gazprom’s market dominance in Europe has been rattled, leading to a strategic shift in global gas supply dynamics.
In response to Western sanctions, Gazprom curtailed gas supplies to Europe. However, this tactic saw reduced impact as alternative gas suppliers like Norway and increased LNG imports from various sources, including the US, filled the gap.
Aside from its natural gas operations, the company’s overall portfolio, including oil, reported a shocking net loss of $7 billion (629 billion rubles) last month, marking its first loss in a quarter century.
Despite China’s neutral stance on Russia’s actions, trade between the two countries has witnessed a surge in recent years. However, negotiations on gas pricing through the proposed Power of Siberia 2 pipeline have hit a roadblock.
The loss of profitable European markets has strained Putin’s financial resources, with the oil industry now serving as the main revenue source to finance the ongoing conflict rather than Gazprom.
Amid concerns about gas supply continuity, European nations like Slovakia and Austria are exploring alternative arrangements for gas transit as their agreements with Gazprom near expiration.
Discussions suggest that injecting Azerbaijani gas into Russian pipelines bound for Europe could be a potential solution to ensure continued gas supply stability.