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Gazprom Will Increase Its Supplies to Europe to the Record-High Level

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February 1
6:04 AM 2016

Russian's Gazprom intend to increase its supplies of gas to a record-high level. In order to support that plan, the company planned to meet investors in New York and London this week.

The Russian exporter currently supplies 30% of gas needs in Europe, which was delivered via neighboring countries such as Ukrainian gas transit pipeline or its new Grayzovets-Vyborg pipeline to Nord Stream gas pipeline under the Baltic Sea.

As Bloomberg reported, the Moscow gas company plan to increase its gas flows to Turkey and the EU bar the Baltic States by 2% this year to a record high. It also will grow the delivery further through 2018, and Bloomberg also reported to have received non public budget which is according to Bloomberg, "more ambitious than public statements by the company to maintain supply."

This year, Gazprom plans to deliver 162.6 billion cubic meters (5.7 trillion cubic feet) to European Union and Turkey through Nord Stream gas pipeline to Germany. This is an increase from 159.4 billion in 2015. While gradual increase of supplies are planned to be at 166.1 billion cubic meters in 2017, and 166.3 billion in 2018.

In order to support its plan, Gazprom will hold its annual Investor Day on Monday, after last year's absence. This event will be held in New York to aim Asian bond and shareholders. While another investor meeting will be scheduled in London on February 4.

One hurdle in Russian plan is the ongoing dispute with Ukraine, which become the transit for 40% of Russian gas delivery transit to European Union. Both Russia and Ukraine has been in a dispute over gas transit for more than 20 years. Prior to opening alternative gas pipeline to Europe, Ukraine has been the major corridor for Russian gas transit. Dispute between both countries are mostly over the price of natural gas and the cost of transit.

The latest dispute occurred last month. According to Reuters, Ukraine decided to impose a $3.5 billion fine to Gazprom for abusing its monopoly on the Ukrainian gas transit market on January 22. Ukraine also planned to increase tariff for pipeline transit to Russia.

However, Ukraine depends on Russian gas transit as its source of income. Therefore on Thursday, Ukraine's Minister of Energy and Coal Vladimir Demchishin decided to maintain its tariff for gas transit without increasing its 50% tarif hike as planned.  Tass reported the minister said to UNIAN news agency, "We have no basis at present [to invoice Russia] under new tariffs because the agreement has not been signed. We are working under existing contracts."

With its plan to expand supply to European countries, Gazprom decided to meet investors in New York and London this week. The company has also have provided alternative route for gas delivery to Europe.

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