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Highlights


Turkish imports of Russian gas soar 32% in period

Gazprom sales to eastern Europe also edge up in Q3

Belarus imports rise 8% after gas price agreement

Gazprom's natural gas supplies to western Europe edged up by 3% year on year in the third quarter of 2017, according to an S&P Global Platts analysis of Gazprom data, as Russian gas deliveries to its core markets continue to outpace last year's levels.

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The Russian gas giant has largely focused its marketing efforts on maintaining healthy relationships with its key customers in western Europe in recent years, with contract renegotiations allowing increased flexibility on pricing and volumes.

Gazprom wants to make sure it can fill the growing import gap expected in northwestern Europe as domestic output drops sharply, driven by lower production in the Netherlands and likely the UK.

It has also used the increase in supplies to the key markets of northwest Europe as proof of the need for the 55 Bcm/year Nord Stream 2 gas pipeline to guarantee security of supply to northwestern Europe.



According to Gazprom's Q3 earnings report published this week, Russian gas supplies to western Europe -- Germany, Italy, France, Finland, Austria, the Netherlands, Switzerland, Denmark and the UK -- reached 28.5 Bcm in the second quarter, up from 27.7 Bcm in the same period last year.

The increase was driven by Italy and France, which saw increases of 5.2% and 17.3%, respectively, in Russian gas purchases compared with the same period last year.

In Germany, Gazprom's sales were flat year on year at 11.6 Bcm, but it is still comfortably the biggest buyer of Russian gas from Gazprom.

Almost all of Western Europe, Turkey increases Q3 Russian gas imports

Gazprom is headed for a new record in 2017 for gas supplies to Europe -- not including the countries of the former Soviet Union -- as demand for Russian gas continues to grow on strong demand in the power sector and falling domestic output.

Germany in particular has seen rising demand for gas for power generation so far in 2017, especially in combined heat and power (CHP) units.


TURKEY SURGE


Gazprom's supplies to its key Turkish market were also significantly higher year on year in Q3 at 6.8 Bcm, an increase of 32% from 5.1 Bcm in the corresponding period last year.

That makes Turkey the second biggest market for Russian gas in the period, overtaking Italy which had been in second place in Q3 last year.

For the first nine months of the year, Gazprom has supplied Turkey with a total of 21.2 Bcm, an increase of 24% year on year from 17.1 Bcm.

The increase can be attributed in part to the improved relations between Ankara and Moscow, which were strained in the first half of 2016 after Turkey shot down a Russian fighter jet on the border with Syria in November 2015.

It also comes against the background of overall Turkish gas demand slowing in recent years.

Consumption fell in 2016 for the first time since 2009 to 46 Bcm and had been expected to be stagnant this year as Turkey looks to depend more on domestic resources for power generation.

Russia dominates Turkish gas supply, its exports accounting for around one half of its demand.

Relations between Russia and Turkey moved firmly back on track in October 2016 with the signing of an intergovernmental agreement paving the way for the construction of two 15.75 Bcm/year strings of the TurkStream pipeline from Russia to Turkey.

With TurkStream construction well under way, the framework for continued strong Russian gas supplies to Turkey seems fully cemented.


EASTERN EUROPEAN RISE


Gazprom's supplies to eastern Europe also rose in Q3, continuing the trend from the first two quarters of the year.

Volumes totaled 8.9 Bcm, up 11% compared with the same quarter of 2016, despite a significant dip in purchases by Poland -- the region's biggest Russian gas consumer.

Poland has begun to increasingly diversify its gas imports by bringing in more LNG to its new import terminal on its Baltic Sea coast at Swinoujscie and importing gas from the west.

As a result, Poland's purchases of Russian gas dipped by 21.4% to 2.1 Bcm in Q3 compared with the same period last year.

Poland cuts Q3 Russian gas imports, supplies mixed in Eastern Europe

Elsewhere, sales in Slovakia and the Czech Republic moved up on higher demand, while Romanian imports were zero.

Romania imported significant volumes of Russian gas in the second half of 2016 and the start of 2017 as the price of Russian gas fell below the cost of domestic Romanian production.

But as Russian prices edged up, Romania was able to secure its demand through increased domestic gas output.

Croatia also continued to import Gazprom gas throughout the third quarter having resumed purchases at the start of 2017, with supplies reaching 0.8 Bcm in Q3.

In December 2016, Gazprom signed a supply deal with Croatia's Prvo Plinarsko Drustvo (PPD) for the first three quarters of 2017, and then in September extended the agreement with a longer 10-year deal through 2027 for 1 Bcm/year.

Gazprom supplies to the former Soviet Union rose in Q3 thanks to a 7.7% year-on-year jump in purchases by Belarus to 3.8 Bcm in the period.

Gazprom gas sales to ex-Soviet states up on Belarus

In April, Minsk and Moscow finally settled a year-long dispute over gas prices and debts, with the new agreement seeing Belarus enjoy a lower Russian gas price.

Total sales to the ex-Soviet Union were up 3.1% to 5.7 Bcm.

--Stuart Elliott, stuart.elliott@spglobal.com