Russian gas exports bank on Asian demand

Russia’s gas export revenues exploded to an all-time high in 2022 and expected to reach close to $150 billion by the end of the year.

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Russia’s steep gas supply cuts to Europe (down by 50 bcm so far) drove up gas and LNG prices to record highs, more than offsetting the effect of lower volumes.

And while this strategy might seem to pay off in the short-term, in the long-term Russia is loosing forever its largest and most reliable export market, which alone accounts for over 70% of Russia’s gas export revenues.

And while Russia continues its diversification efforts towards Asia, our analysis shows that in best case, it would take Russia a decade to increase its supplies to Asia to a level close to its 2021 exports to the EU.

And of course price levels will be different as Russia won’t have the same negotiation power.

Just for reference: China currently pay for Russian piped gas ~$6/mmbtu, or 10 times less than European hub prices at the moment.

What is your view? How will Russia’s strategy evolve in the coming years? Can it bet on Asia?

Source: Greg Molnar