Gazprom delays Arctic drilling amid financial woes, China deal failure

Losses, sanctions limiting access to modern technologies, and China's reluctance to enter into a new contract for the supply of Russian gas have forced the Gazprom company to postpone plans for the development of Arctic deposits, the Moscow Times reported on Wednesday.

Citing data from the state geological survey registry, the portal claims that Gazprom has shifted plans to start Arctic drilling by three to four years. This includes operations in the Kara Sea and Barents Sea.

According to estimates from the Russian energy ministry, 20 percent of Russia's oil reserves and over 70 percent of natural gas reserves are on the Arctic shelf.

Gazprom has been forced to postpone its investments due to a significant deterioration in its financial situation and unsuccessful negotiations with China regarding the construction of the new Power of Siberia 2 gas pipeline. The project, which would have enabled Russia to increase gas supplies to China to 100 billion cubic metres annually, did not receive approval from Beijing.

As industry media reported, China agreed to purchase gas exclusively at domestic Russian prices (around CAD 82 per thousand cubic metres), which would make the investment unprofitable.

In 2023, Gazprom recorded a loss of 629 billion rubles (over CAD 10 billion) for the first time in 25 years. Russian gas exports via pipelines fell to 69 billion cubic metres, the lowest level since 1985. Exports to Europe, once Gazprom's main market, reached their lowest level since the late 1970s.