Russia’s largest gas producer reports record decline

Gazprom, Russia’s majority state-owned energy giant, announced its largest-ever reduction in natural gas production, citing impacts from the ongoing conflict in Ukraine. The company’s annual report released Monday showed a 13% decrease in production to an all-time low of 359 billion cubic meters (bcm) in 2023, compared to 412.94 bcm in 2022 and 515 bcm in 2021.

Historic low

The figures mark the lowest production levels since Gazprom’s establishment by the Ministry of Gas Industry at the end of the Soviet Union in 1989. This historic decline reflects the broader economic impact of sanctions following the Russia-Ukraine conflict, with Gazprom posting its first annual loss in 25 years. The company reported a net loss of 629 billion rubles ($7 billion) for 2023.

Moscow has been accused of using its energy exports as a geopolitical tool, with Gazprom limiting flows to its European market in response to Western sanctions. However, this strategy appears to have backfired, as Europe has successfully diversified its gas supply sources. Norway has overtaken Russia as Europe’s top pipeline gas supplier, and liquefied natural gas imports from the United States and other countries have increased.

Challenges in European market

“European governments have basically decided that they’re not coming back and they made certain deliberate steps to switch to alternative suppliers,” Vladimir Milov, Russia’s former deputy energy minister, told the weekly magazine Newsweek.

The loss of Gazprom’s European markets has significantly impacted Russia’s economy, though the oil sector continues to generate profits and taxes.

As the conflict persists, European officials are exploring ways to ensure gas supply through the Russia-Ukraine pipeline when its contract with Gazprom expires at the end of 2024. Slovakia and Austria are among the countries still reliant on Russian gas via this route. One proposed solution involves European companies purchasing and injecting gas from Azerbaijan into Russian pipelines heading to Europe.