Gazprom Bets on China, Cuts 2025 Investments by 7%

The Russian giant is now prioritizing developments that would boost supply to China while preparing for an end to gas deliveries to Europe via the Ukraine route.

Russian gas giant Gazprom is cutting its planned investments for next year by 7% compared to 2024 levels.

Gazprom’s management has yet to approve the plan for next year, but its base-case scenario is that there would be no flows via Ukraine to Europe.

Russian gas sales in China are rising as Gazprom is ramping up capacity via a major pipeline. But another similarly large-scale pipeline project appears to have stalled due to disagreements between Russia and China about the price.

It is unclear when a second major pipeline will raise supply to China as much as to offset Gazprom’s falling gas sales in Europe.

The Russian giant is now prioritizing developments that would boost supply to China while preparing for an end to gas deliveries to Europe via the Ukraine route.

Accordingly, investments next year will focus on the expansion of the capacity of the Power of Siberia pipeline to China, among others.

For 2025, Gazprom is now budgeting investments of $14.1 billion (1.524 trillion Russian rubles). This would be 7% lower than the investments for 2024, which the company has recently raised to $15.2 billion, or 1.642 trillion Russian rubles.

The firm’s management committee approved the budget and investment plans for next year, and these are yet to be approved by the board of directors of the holding company, Gazprom said this week.

“The approved financial plan will ensure that Gazprom’s obligations are fully covered without a deficit,” it said in a statement carried by Russian news agency TASS.

“Decisions on borrowing under the program will be made on the basis of market conditions, liquidity and the company’s financing needs.”

Over the past year, Gazprom has been booking losses amid falling gas sales in Europe. For 2023, the Russian gas giant booked its first annual loss in more than two decades.

European sales are likely to plummet further in 2025, as Gazprom itself is assuming that it will not be sending gas to Europe via Ukraine after December 31, 2024, when the current transit deal expires.

Gazprom is assuming in its internal planning for 2025 that it will not be sending natural gas to Europe via Ukraine as of January 1, a source with knowledge of the Russian gas giant’s plans told Reuters this week.

Gazprom’s management has yet to approve the plan for next year, but its base-case scenario is that there would be no flows via Ukraine to Europe, according to Reuters’s anonymous source.

Russia’s exports to Europe and Turkey, excluding ex-Soviet countries, are expected to fall by one-fifth next year to just below 39 billion cubic meters (bcm) due to the end of the Ukrainian transit deal. That would be down from more than 49 bcm of Russian exports to Europe and Turkey expected for 2024.

With most European markets closed, Gazprom now looks to China—an enormous market where gas demand is expected to keep rising in the foreseeable future.

China has now become a larger export market for Russia’s gas than Europe, and Gazprom plans to boost its supply via Power of Siberia.

Last month, a senior Gazprom executive said that the company’s gas supplies to China this year would exceed planned contract volumes by 1 bcm.

But a significant boost to supply that would more than double the current flows with a new pipeline, Power of Siberia 2, looks further away than it did last year.

Russia appears to be struggling to convince China to take on more pipeline gas. Beijing is not committing to the massive new pipeline project to import Russian pipeline gas unless it’s favorable for the world’s second-largest economy.

Despite Russian assurances, the proposed Power of Siberia 2 pipeline, which is planned to pass through Mongolia, is nowhere near a concrete commitment from China on the price and volumes at which the Russian gas would be imported.

Moreover, Mongolia has left the pipeline plan out of its five-year investment program, which suggests that Power of Siberia 2 is unlikely to see the light of day this decade.