Board of Directors reviews influence of 2022’s events on long-term global energy market outlook

The Gazprom Board of Directors took note of the information about the impact of the events of 2022 on the long-term outlook for the global energy market.

The main outcome of the year is structural changes observed in commodity markets. The transformation of the global energy system is taking place against the background of crisis events. The main consequences brought about by them are unprecedented growth of prices, redirection of gas supplies, and reduction in gas consumption.

For instance, preliminary estimates show that in the first eleven months of 2022 global gas demand declined by 55 billion cubic meters versus the same period of last year. Reduced gas consumption in the European Union became a key factor driving the decline, as about 50 billion cubic meters out of the above reduction figure are attributed to the 27 EU countries.

The first signs indicating a shortage of gas in the global market were already observed in 2021, when a considerable portion of growth in global gas consumption was covered by increased gas production of Gazprom.

In 2022, the imbalance between gas demand and supply was intensified by politically motivated decisions aimed at halting the imports of Russian gas, which were adopted by a number of countries. With the growth of gas prices in Europe, flows of liquefied natural gas were redistributed and shifted to the European market from other regions. It has to be noted that the increased supplies of LNG to Europe were to a large extent achieved through redirecting LNG shipments, not through boosting LNG production. In practice, this caused a shortage of energy resources in other countries.

The events of 2022 generally confirmed that fossil fuel is of key significance for the global economy. In particular, the demand for coal and petroleum products has increased. Decarbonization targets were downgraded by many countries. Energy security and affordable energy resources have again become a priority. At the same time, the situation in the energy market was further aggravated by the unprecedented subversive actions that were committed at the Nord Stream 1 and Nord Stream 2 offshore gas pipelines in September.

Despite the ongoing uncertainty of long-term forecasts for the energy market development, it is clear that natural gas will continue gaining increased importance in the global energy mix. Its consumption is expected to increase by about 20 per cent by 2040 versus 2021. China will play a key role in the growth of energy consumption, including gas consumption. The Chinese gas market, which is the most dynamic one in the world, will grow to a level above the cumulative gas consumption of all European countries as early as in the medium-term perspective.

Gazprom remains committed to strengthening the energy security of the Russian Federation and its strategic partners. The Company continues expanding and developing its capacities in the production, transportation and processing of hydrocarbons; inter alia, efforts are underway to connect the gas infrastructure that exists in the west of Russia with that present in the east of the country. Gazprom is also preparing the launch of the Kovyktinskoye field and a section of the Power of Siberia gas pipeline for supplying gas to Russia's eastern regions and increasing gas exports to China.