“The main consequences of the sanctions for Gazprom and the energy industry are the contraction of export volumes, which will be restored to the 2020 level no earlier than 2035,” the authors of the document wrote. The 151-page report, commissioned by company management and compiled late last year, is among the most candid acknowledgments yet of how Western sanctions imposed in response to Russia's war have damaged Gazprom and the broader Russian energy sector, according to the “Financial Times”.

Infrastructure’s critical importance is precisely why it’s so often targeted during war. Destroying factories, bridges and power plants thwarts a country’s warfighting capacity. At the same time, it undermines a government’s ability to offer basic public services. It’s no surprise, then, that Russia has systematically attacked Ukraine’s transportation networks and energy production since the start of the invasion.

The damage has been catastrophic. An estimated $100 billion worth of infrastructure was destroyed in the war’s first month alone. Now, as the conflict enters its third year, at least half of the country’s energy grid and one-third of its transportation networks have been damaged as a result of Russian attacks.

And the situation continues to escalate. Drone and missile strikes throughout early 2024 have been aimed directly at Ukrainian power generation and distribution, reducing energy companies’ output by up to 80% and leaving nearly 2 million people without power.

Bloomberg) -- Russia’s oil proceeds to the state budget increased almost 50% in May from a year ago, as its crude prices rose and the nation adapted to international sanctions.

Oil-related taxes rose to 632.5 billion rubles ($7.1 billion) last month, according to Bloomberg calculations based on Finance Ministry data. Total oil and gas proceeds increased 39% to 793.7 billion rubles, the ministry said.

The revenue spike follows higher prices for Urals crude, Russia’s key export blend. The ministry calculated May taxes based on the Urals price of $74.98 a barrel, up from $58.63 a year ago. The blend’s discount to the global Brent benchmark has narrowed, even amid a price cap imposed by the Group of Seven nations.

The G-7 measure aims to reduce the inflow of petrodollars — key to financing the Kremlin’s war against Ukraine — by limiting access to western shipping and insurance services, while still keeping Russian on the global market. Moscow has adapted to restrictions, including a European Union ban on Russian oil imports, by using a massive shadow fleet of tankers and selling its oil to Asian clients.

On a monthly basis, oil and gas budget proceeds actually declined by more than 35% in May, according to Bloomberg calculations. The drop reflects the fact that one of Russia’s key oil taxes — the so called profit-based levy — is paid four times a year, in March, April, July and October.

Russia’s oil revenues last month could have been higher if they hadn’t been dented by enormous subsidies to the nation’s fuel producers. The government paid out almost 202 billion rubles to companies for domestic supplies of diesel and gasoline, according to the Finance Ministry. The payments partially compensate refiners for the difference in car fuel prices in Russia and abroad.

Lower Expectations

Even with oil and gas revenues higher annually, Moscow has proposed trimming the total 2024 outlook for earnings from the industry. The budget is now expected to receive 10.99 trillion rubles from the industry this year, compared to an earlier estimate of 11.5 trillion rubles, a draft amendment to the nation’s finances shows.



The downward revision comes as the government projects lower export prices for Russian crude and natural gas for this year, acknowledging that price spikes seen in 2022 are long over, according to the draft amendment, published on a parliamentary website.

Russian crude is now expected to trade at about $65 a barrel this year, compared to an earlier projection of $71.30. The average export price of gas is set at $252.80 per thousand cubic meters, down nearly 6% from the current version of budgetary projections.

Global oil prices, which are traditionally higher than the price of Urals, are now near a four-month low amid slow demand growth. The risk premium that emerged due to the war in the Middle East have also fizzled out.

A decision on Sunday by Organization of Petroleum Exporting Countries and its partners — which include Russia — to gradually restore some production from October is adding to market concerns of a potential supply overhang.

©2024 Bloomberg L.P.

By Bloomberg News

Russia deploying air and sea assets for military exercises in Caribbean, U.S. official says

Michael Wilner
Wed, June 5, 2024 at 4:00 PM PDT·3 min read
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Likely: Short-term opportunities

The war in Ukraine and the disruption of Russian gas pipeline supplies to Europe have created at least a short-term opportunity for LNG suppliers to fill Europe’s gas consumption gap. The continent has a well-established infrastructure for LNG receiving terminals, with more planned following the war.

However, whether Europe will be a stable long-term customer – let alone a growing one – depends on several factors. These primarily include the alternative gas supply options available from within Europe (including supply from alternative fuels); the evolution of European gas demand, particularly whether ambitious policy targets can be met; and the availability as well as price of alternative energy sources.

Less likely: Long-term growth

The REPowerEU plan implies that there may be little or even no scope to increase imports of LNG over the longer term (beyond 2030). However, the targets in that plan look rather aspirational. For instance, to achieve them, the roll-out of wind and solar power through 2030 will have to exceed four times the historic growth rate for wind and six times the historic rate for solar.

The potential long-term demand for natural gas, and LNG in particular, is therefore linked to the question of how widely Europe will miss its policy targets. This is what many LNG exporters are now trying to figure out.