Gazprom Natural Gas Production in July Falls to the Lowest since 2008, Aggravating Worries of “Supply Cut” in Europe

Gazprom PJSC's daily natural gas production plunged to its lowest level since 2008 in July, with exports to key markets falling for a fourth straight month. Western countries are increasingly worried that Russia may completely cut off gas supplies to Europe, exacerbating Europe's energy crisis.

According to data released by the media on Monday, Gazprom's daily natural gas production in July was 774 million cubic meters, down 14% from June; the year-to-date natural gas production was 262.4 billion cubic meters, down 12% from the same period last year. In addition, the company plans to produce 494.4 billion cubic meters of natural gas throughout 2022, down 4% from last year.

The EU has historically been Gazprom's largest single market. Its gas supplies to the European Union have fallen sharply recently as Russia's relations with the West have deteriorated due to the Ukraine crisis. Last month, the company further cut the supply amount of Nord Stream 1, the largest natural gas pipeline to Europe, to 20% of its capacity, citing turbine maintenance issues.

According to media estimates, Gazprom supplied an average of 206 million cubic meters of natural gas per day to countries outside the former Soviet Union in July. That is down about 22% from June and the lowest level since at least 2014.

Worries about Europe's "complete cut off" intensify

European governments and businesses are now worried that Russia could cut off the gas supplies entirely, and the European Union struggles to prevent the energy crisis from plunging the eurozone economy into recession.

Gazprom announced on July 30 that Gazprom had stopped supplying gas to neighbouring Latvia due to the country’s violations of gas supply-related terms. Previously, supplies to Poland, Bulgaria, Finland, the Netherlands and Denmark had been "cut off" by Russia for refusing to comply with the "Ruble Settlement Order".

EU member states last week agreed to voluntarily cut gas use by 15% from August to March next year amid concerns that Russia could cut off gas supplies to Europe entirely during the cold winter. This voluntary agreement will become mandatory once the supply situation reaches crisis levels.

In order to reduce the consumption of natural gas, many European countries have recently announced to reopen coal power plants or take measures to support coal power. However, according to the fifth round of sanctions against Russia agreed by the EU, the EU will stop buying, importing or transshipping coal and other solid fossil fuels produced in or exported from Russia starting from August.