• Gazprom (GAZP.ME) increased gas production by 3.4% year-on-year to 216.55 billion cubic metres in the first half, according to Interfax.
  • The modest uptick reflects higher domestic and Asian demand, but does little to offset the loss of lucrative European export volumes.
  • Analysts caution that production growth is not a proxy for revenue, as pricing, routes, and contract terms remain under pressure.

Gazprom Reports Modest Production Gain

Gazprom boosted natural gas production by 3.4% in the first half of the year, reaching 216.55 billion cubic metres (bcm), according to a report from Interfax. The increase marks a slight recovery in upstream activity for the Russian state-controlled energy giant, which has been forced to pivot away from its traditional European market following the war in Ukraine and subsequent sanctions.

The figure compares with 208.14 bcm produced in the same period a year earlier, which itself was a 16% jump from a depressed 2023 base after Europe-bound volumes collapsed. While the latest number signals operational stability, it remains far below the levels Gazprom achieved before 2022, when Europe accounted for the bulk of its high-margin gas sales.

Domestic and Asian Demand Support Output

Higher production likely stems from increased domestic consumption and ongoing deliveries to China via the Power of Siberia pipeline, which reached its designed capacity in December 2024. Russia has also maintained exports to Turkey and southeastern Europe through TurkStream and Blue Stream, though these routes represent a fraction of the once-dominant European business.

The production uptick comes despite the expiration of the Ukraine transit agreement on January 1, 2025. Kyiv refused to renew the deal, cutting off a key corridor that had carried Russian gas to Europe for decades. Reuters estimated that Gazprom could lose close to $5 billion in gas sales annually as a result, while Ukraine forfeits up to $1 billion in transit fees.

Financial Pressures Persist

Gazprom’s financial performance has been mixed. In 2024, the company reported a net profit of RUB 1.219 trillion, reversing a RUB 629 billion loss in 2023, as revenue rose 25% to RUB 10.7 trillion and EBITDA surged 76% to RUB 3.1 trillion. However, in the first half of 2025, net profit fell nearly 6% year-on-year to RUB 983.1 billion, while revenue slipped 2% to RUB 4.99 trillion. The company attributed the decline to a stronger ruble and lower oil prices.

EBITDA nevertheless increased 6% to RUB 1.55 trillion, and adjusted net debt fell to RUB 5.5 trillion, suggesting improved cash generation and debt management. Still, the loss of European export revenues continues to weigh on profitability.

Europe’s Phase-Out Looms

The European Union has accelerated its shift away from Russian gas. According to EU data, dependency on Russian gas fell from 45% of total imports in 2021 to just 12% in 2025. Regulation (EU) 2026/261 formalizes a gradual ban: Russian LNG imports are to be phased out by the end of 2026, and pipeline gas by November 2027.

“Institutional investors are really focused on regulatory stability,” said Andrea Valeri, Blackstone (BX)’s country chairman for Italy, at a recent conference in Milan. “Italy in this regard has been on a very steady growth trajectory.” His comments reflect a broader European push to attract private capital into alternative energy infrastructure, as the continent reduces reliance on Russian supply.

Outlook: Asian Pivot Not a Full Replacement

Gazprom’s long-term challenge is replacing not just the volume but the profitability of its former European business. China is expected to import 38 bcm of Russian gas in 2025 via Power of Siberia, but that is unlikely to fully offset the loss of Western markets. Carnegie estimates that the Ukraine transit shutdown alone could remove about 10% of Gazprom’s revenue and just under half of its gas-division profit.

Key factors to watch include the sustainability of Chinese demand growth, the economics of additional Russia-China pipeline capacity, oil prices and the ruble, and the enforcement of the EU’s phase-out. Gazprom’s massive pipeline network, built for Europe-bound flows, may become increasingly underutilized.

A spokesperson for Gazprom did not immediately respond to a request for comment.

Correction: An earlier version of this article misstated the year-on-year comparison for H1 2024 production. It was 208.14 bcm, up 16% from 179.45 bcm in H1 2023.