GLEG UK Energy Market Update
November 25, 2024GLEG UK Energy Market Update
December 2, 2024Gazprom, Russia’s state-owned gas company, is preparing for a potential halt in natural gas deliveries to Europe through Ukraine after December 31, 2024, according to a Reuters source familiar with the company’s plans. Ukraine has announced it will not extend its transit agreement, which has enabled the transport of gas from Siberia to Central Europe for over 50 years—a significant revenue stream for Russia since the Soviet era. This transit generates up to $1 billion annually in fees for Ukraine, but the country has made clear its intention not to renew the deal.
Moscow has signaled its willingness to continue using the Ukrainian pipeline, with President Vladimir Putin expressing openness to maintaining gas shipments. However, Gazprom’s internal projections assume no transit via Ukraine in 2025. The company anticipates a 20% drop in Russian gas exports to Europe and Turkey next year, with volumes expected to decline from over 49 billion cubic meters (bcm) in 2024 to just under 39 bcm in 2025. This forecast excludes gas supplied to China through the Power of Siberia pipeline, projected to reach 38 bcm in 2025. Deliveries to Turkey via the TurkStream and Blue Stream pipelines are expected to remain steady.
Russian gas flows to Europe through Ukraine have already decreased significantly, with just 15 bcm delivered in 2023—only 8% of the peak volumes seen in 2018-2019. In 2023, the Urengoy-Pomary-Uzhgorod pipeline transported about 14.65 bcm of gas from Russia’s Kursk region to Slovakia via the Sudzha entry point, accounting for roughly half of Russia’s remaining European exports.
The conflict in Ukraine and the 2022 Nord Stream pipeline explosion have heavily strained Russia’s energy ties with Europe. EU gas consumption fell to 295 bcm in 2023, with the bloc increasingly relying on U.S. liquefied natural gas (LNG) to meet its energy needs.