Russia prepared to increase European gas supply if requested: Putin

Russia is prepared to increase gas supplies to Europe if it receives requests for more gas from its customers, President Vladimir Putin said Oct. 13.

Speaking during Russian Energy Week in Moscow, Putin also said high gas prices could have a negative impact on all parties, including producers.

European gas prices have soared in recent months, with the surge partly attributed to lower-than-expected Russian supply. The day-ahead TTF price hit a high of Eur116.10/MWh ($39.5/MMBtu) on Oct. 5, according to S&P Global Platts price assessments.

Putin said Russia was prepared to discuss with its gas consuming partners any "additional" steps for future gas supply, adding Russia had already increased pipeline deliveries to Europe by 10% year on year in 2021.

"If we are asked to increase some more, we are prepared to increase some more," he said. "We can supply more, but we need requests to do that. We are increasing supplies by as much as we are asked to. If they ask for more, we will supply more."

Putin said that including Russian LNG deliveries to Europe, Russia had already increased supplies to Europe by 15% year on year.

Russian supplies to global markets could hit a new record in 2021, he said. "We are always trying to meet our partners halfway and we are prepared to discuss any additional steps," Putin said.

S&P Global Platts Analytics, in response to Putin's comments, said there were still concerns over Russian gas supply to Europe for the remainder of 2021.

"While overall Russian production is up year on year, the issue is that Europe needs the imports now," Platts Analytics analyst James Huckstepp said.

"And Russian flows to Europe are currently at 5+ year lows," Huckstepp said, adding Gazprom's sales on its Electronic Sales Platform for delivery this winter had ended in August.

"So, we are not optimistic about near-term Russian gas availability," he said.

Energy 'weapon'

Asked directly whether Russia was using gas as a weapon, Putin said: "Russia has not been using any weapons. This is politically motivated blather."

Putin pointed to a fall in US LNG supplies to Europe in 2021 with cargoes drawn to higher-priced Asian markets.

"Who is using energy tools for their own purposes? We are increasing supplies, while other partners including the US are decreasing their supplies," Putin said.

He said the high gas prices in Europe were due to lower supply from other regions, as well as low European storage stocks and low wind generation in Europe. "This is the cause of the panic. The problem is not us."

Putin also warned of the risk of supplying more gas to Europe via Ukraine, saying it would be "dangerous" to increase deliveries given that the Ukrainian equipment was "80% outdated".

"This year we have supplied via Ukraine 10% more than our obligations," he said. "To increase this, the system has to be modernized," he said.

Gazprom in late 2019 agreed to transit 65 Bcm of gas via Ukraine in 2020 and 40 Bcm/year in the 2021-2024 period, well down on a recent transit peak of 94 Bcm in 2017. The contract is due to expire at the end of 2024.

Putin said Russia needed to know how much gas demand there would be in Europe to justify continuing to use the Ukrainian route after 2024. "We need to understand how much we can sell," he said.

"We are willing to preserve this contract," he said. "If the economic and technological conditions are there, we are even willing to increase volumes. [But] if Europe is abandoning hydrocarbons, how can we commit to increased transit via Ukraine if Europe stops buying gas from us?"

Putin also said the now-complete Nord Stream 2 was cheaper and shorter than the Ukrainian route, adding that Gazprom's production base had moved northward to the Yamal Peninsula as its traditional fields in West Siberia continued to deplete.

"Nord Stream 2 -- and Nord Stream 1 -- are purely commercial projects," he said.

Asked if he had any clarity on the regulatory process that needs to be completed before Nord Stream 2 could start operations, Putin said: "We see that the administrative hurdles have not been removed. The decision by the German regulator has not been made."

"We could supply more via this route, and if we could do that, we could be sure that this would significantly pacify European gas markets and would have a serious effect on the gas prices," he said.

Price 'stability'

Putin said high prices were not good for producers and consumers alike. "We often hear that high prices play into the hands of commodity producers, allowing them to have surplus revenues without any visible effort," he said.

But, he said, those views did not take into account the long-term prospects for the commodity.

"A sharp multi-fold increase in energy prices forces companies, economies, utilities to drastically increase their expenses, and drives down energy consumption," he said. "Accordingly, high prices could have a negative effect for everyone, including for the producers."

Putin said that for any market, stability and predictability were crucial. "And Russia flawlessly fulfills its contractual obligations to our partners, including our partners in Europe. We ensure guaranteed, uninterrupted gas deliveries to Europe," he said.

Putin said state-controlled Gazprom could earn more if it sold gas at spot prices, but as a producer, "it is interested in stability. This allows them to shape their investment policy."

'Systematic flaws'

Saying that the European gas market did not appear to be "well balanced and predictable", Putin said not everything in the market depended on the producers. "No lesser role is played by the consumers of gas," he said.

Putin said the share of renewable energy in the European energy mix had increased over the past 10 years, which was a good thing.

But, he said, renewables were intermittent, meaning there needed to be "serious" reserves in place to guard against disruption to renewables generation, such as changing weather conditions.

Gas prices on the European spot market had increased in part due to a "deficit" in energy generation, he said.

"Higher gas prices in Europe are a consequence of an energy deficit," he said, adding: "That is why you should not deal in blame-shifting."

Over the past 10 years, systematic flaws were introduced into the European energy system and they led to a massive energy crunch, he said.

"Back when nuclear and gas generation were the leading energy sources there were no crises -- there was simply no way such a crisis could occur."

Putin said that in Russia "such problems are impossible to imagine" given the country's long-term approach to energy sector development.