Gazprom and Novatek to Gain from Surge in European Gas Prices

The escalating gas prices, driven by the conflict in Iran and a global shortage of liquefied natural gas (LNG), are expected to boost revenues for Gazprom and Novatek in Europe and Turkey. Although these gains will not fully offset losses from reduced pipeline gas supplies to the EU, they are projected to be the highest since 2022. The Russian government anticipates an average export price of $402.9 per thousand cubic meters for non-CIS countries in 2026, marking a 24% increase from last year.

The conflict in Iran has disrupted LNG exports from Qatar and the UAE, significantly impacting gas prices in Europe and Turkey. These prices are linked to stock quotes at the Dutch TTF hub. For the remainder of the year, prices are expected to remain elevated at $701.9 per thousand cubic meters, with an average cost of $562 projected for 2026, a 38% increase from current levels.

Revenues from European and Turkish markets are expected to surpass those from China, which is becoming the primary importer of Russian gas. Prices in China are projected to rise by only 3% to $247.9 per thousand cubic meters. The price disparity between Europe and China is attributed to the oil-linked pricing mechanism in China, as opposed to the stock quote-based pricing in Europe and Turkey.

The EU plans to completely phase out Russian gas within the next year, which the Russian government anticipates will reduce export prices to Europe and Turkey to $400 per thousand cubic meters. Additionally, a slight decrease in gas prices for China is expected, with exports projected to reach 239.2 billion cubic meters. The predicted decline in prices is likely based on the assumption that the Strait of Hormuz will reopen and new LNG plants will continue to launch in the USA.