After the Russian attack on Ukraine, the EU began to restructure its energy supply. The focus is on the massive throttling of Russian deliveries. As a result, Moscow has to reduce its production and report a significant drop in sales.
Russia expects its natural gas production to fall significantly this year because of international sanctions. Around 12 percent less gas will be produced and a good quarter less will be sold abroad. Deputy Prime Minister Alexander Novak told the state news agency Tass that the year-on-year decline in gas production was largely due to the shutdown of export infrastructure. The majority of sales are via pipelines, mainly to Europe.
Russia's energy exports are under pressure from international sanctions and efforts by Europe, which has long been a major buyer of Russian gas, to limit oil and gas purchases and prices paid to Russia. Nowak also said that the production and export of liquefied natural gas transported by ship will increase by about 8.7 percent by the end of the year.
Nowak had previously said that Russia could reduce its oil production by 500,000 to 700,000 barrels a day by early next year in response to Western price caps introduced earlier this month, which would translate to a capacity reduction of five to seven percent. Russian President Vladimir Putin is expected to sign a decree this week on Moscow's response to western oil price caps aimed at draining the Kremlin's war chest.
The European Union and Britain have also banned the shipment of Russian crude oil by sea. Russian government officials have downplayed the impact of price caps and other sanctions on Russia's oil and gas sector, the lifeblood of Russia's economy.
Novak, a former energy minister, told Tass that while this year has proven to be extremely difficult for Russia's fuel and energy sector, it hasn't ultimately been all that bleak.
Since Moscow's invasion of Ukraine in February, Russian authorities have halted the release of trade statistics, including oil and gas production, to protect the economy and domestic companies from further sanctions. This change makes it more difficult to independently verify Moscow's claims that it was able to protect its economy from sanctions.
In January, when the latest data were available, natural gas exports totaled $9.5 billion and the value of LNG exports was $1.26 billion, according to the Federal Customs Service of Russia.
