World Economy

Germany a Loyal Gas Customer for Russia

Germany a Loyal Gas Customer for RussiaGermany a Loyal Gas Customer for Russia

Russia boosted natural gas supplies to Germany by almost 50% in the second quarter as prices plunged, while the world’s largest natural gas exporter struggled with weaker demand from its former Soviet allies.

Gazprom PJSC’s deliveries to Germany jumped to 11.7 billion cubic meters compared with 7.8 billion a year earlier, the highest quarterly level since at least 2010, according to data on the Moscow-based exporter’s website. Gazprom’s average gas price at the German border fell 36% this year as crude plunged, Bloomberg reported.

The European Union, which gets about 30% of its gas from Russia, may be Gazprom’s only growing market this year, the government in Moscow said last month. Gazprom has boosted fuel sales to the 28-nation bloc since the end of May as Brent crude slumped 21%. Most of the company’s gas contracts are linked to the price of oil.

“Germany has been a loyal customer for Russia for years,” said Alexander Kornilov, an oil and gas analyst at Alfa Bank in Moscow. “Such relationships stay in place, though volumes depend on a price—business is business.”

Gazprom’s price to Germany fell to $6.68 per million British thermal units in July, the lowest level since December 2009, according to the International Monetary Fund. Germany is importing almost all of its gas from Russia now, energy broker Marex Spectron Group Ltd. said in a July 29 note.

Germany was the only nation among Gazprom’s key clients that increased Russian gas purchases in the first half. The company’s total shipments of the fuel fell 10% to 222.8 billion cubic meters through June, mainly because of lower sales in Italy, Turkey, Central Europe, Ukraine and Russia, Gazprom said in its earnings report under Russian accounting standards on Friday.

Gazprom cut its 2015 output forecast for at least the third time this year, reducing its outlook to 444.6 billion cubic meters, according to the report. That’s only 0.1% higher than last year’s record-low output. Russia’s Economy Ministry predicted last month the gas company would cut output to 414 billion cubic meters for 2015.