Turkish Stream compensated Gazprom for Ukrainian transit. Partially: What's next?

The growth of supplies via the Turkish Stream to Europe partially compensated Gazprom for the loss of Ukrainian transit. However, the increase in exports via the southern route cannot be compared with the company's losses in Europe from 2022. Gazprom believes that it is necessary to increase domestic gas prices in Russia, which are below cost. Experts note that there will be no changes so far, since the government has previously approved indexation. Gazprom can rely on the growth of supplies to Central Asia, China and the possible intensification of exports to Europe and Turkey as part of the peace process, analysts say.

According to ENTSOG, in January-March, deliveries via the European line of the Turkish Stream increased to 4.46 billion cubic meters. Compared to the figures of the first three months of 2024, the growth amounted to more than 600 million cubic meters, which can be considered some kind of compensation for stopping Ukrainian transit.

These volumes account for 16% of deliveries through Ukraine in January-March 2024.

At the same time, supplies could have been higher if gas flows along the European line of the Turkish Stream had not decreased in March. Thus, the average daily figures dropped from 54.6 million cubic meters per day to 44.8 million compared to the record February.

Obviously, this is due to the fact that warm weather has come to Europe and Gazprom's customers have reduced their bids. For example, Greek companies — twice, up to 5 million cubic meters per day.

Obviously, in April, Russian gas exports to Europe via the Black Sea gas pipeline may increase. The heating season will end and gas will be pumped into storage facilities by the next one.

Slovak Prime Minister Robert Fico and the Slovak company SPP stated that after the Ukrainian transit was stopped, part of the gas was redirected through the Turkish Stream and supplies should double from April. Approximately — up to 6 million cubic meters per day.

By January 1, Slovakia, the Czech Republic and Italy were receiving Russian gas via the Ukrainian route. Gazprom's fuel sales continued in Austria, but not from the Austrian OMV, which did not make a payment in mid-November and the Russian company stopped its gas shipment.

Experts noted that the Turkish Stream partially compensates for the shutdown of Ukrainian transit — 2-3 billion cubic meters out of 15 billion cubic meters per year. However, exports via this route are limited by the technical characteristics of gas pipelines.

The stop of Ukrainian transit has become an expected, but unpleasant event for Gazprom. And the March attacks by the Ukrainian Armed Forces on the Sudzha gas measuring station showed that the resumption of supplies is not possible soon. Prior to that, supplies to Europe had already decreased five times due to sanctions and counter-sanctions. Despite the fact that Europe has always been the most profitable market, which made it possible to maintain low gas prices in Russia.

"The current level of regulated wholesale gas prices (in Russia — ed.) does not ensure the formation of financial resources in sufficient amounts to make the necessary capital investments in the maintenance and development of gas infrastructure in the interests of Russian consumers, which cannot but affect the reliability of gas supply in the long term and complicates investment decisions on the development of gasification and the implementation of other important infrastructure projects," Alexey Sakharov, head of Gazprom's department, said in January in the State Duma, Interfax reported.

Alexey Grivach, Deputy Director of the National Energy Security Fund (NWF), notes that plans for gas price indexation have already been adopted as part of the budget process and no action is being taken to revise the indexation parameters.

In December, the government approved the indexation of regulated wholesale gas prices by 10.3% from July 1 for all categories of consumers, except for electric power companies and utilities.

"At the same time, the level of indexation of gas tariffs for the electric power industry and housing and communal services will be equalized with the increase in tariffs for other categories of industry by an additional 11.0% from July 1, 2025, that is, taking into account the overall increase — by 21.3%," Interfax reported.

"In Russia, gas production by independent producers is growing significantly. Therefore, it remains to be hoped that the growth of domestic gas prices above the inflation rate will be avoided. In addition, there are hopes for a positive outcome of the peace talks, as well as for the possibility of supplying gas to Central Asian countries and through gas pipeline systems to China," says independent industrial expert Maxim Shaposhnikov.

Alexey Grivach, Deputy Director of FNEB, notes that Gazprom still has technical opportunities to increase exports to Europe and Turkey.

"Judging by some statements and leaks, such conversations are being held as part of the process of resolving the Ukrainian crisis," the expert says.

The main and planned increase will occur due to the "Power of Siberia" to China. Deliveries will increase by 7 billion cubic meters — up to the contract 38 billion cubic meters.

In the report for 2024 according to RAS, Gazprom indicated a loss of 1 trillion rubles. However, experts advise not to rush to conclusions.

"Profit tax provisions and a decrease in Gazprom Neft quotations are the reasons for the loss. In general, this is not a monetary loss, so the value of this indicator for analyzing the state of the company is small," says Maxim Shaposhnikov.

At the end of December, Gazprom promised to fully implement the investment program for 2025.

"Financing of the investment program of PJSC Gazprom has been approved in the amount of 1.52 trillion rubles. The structure of capital expenditures in 2025 will not change significantly: a significant part of the funds will continue to be directed to the implementation of priority projects that ensure reliable gas supplies to the domestic market and for export, as well as to the development of gasification of Russian regions," said Deputy Chairman of the company Famil Sadygov.

He noted that the budget for this year included the level of export prices in Europe and Asia below current market quotations, as well as average prices in 2024. Gazprom also promised to continue its tough policy of curbing operating costs.