Page 7 - FSUOGM Week 31 2021

FSUOGM PERFORMANCE FSUOGM

Natural gas becomes costlier

than oil: VTBC

EUROPE NATURAL gas is becoming more expensive prices – although for ESG-concerned investors,
than crude oil in terms of barrels of oil equivalent it might be the preferred stock in the Russian
VTBC believes that (boe), VTB Capital (VTBC) said in research on energy space thanks to the company’s plans
the premium will be August 2, following months of restricted supply for hydrogen, blue ammonia and green LNG
sustained unlike in and unusually high demand. production.”
previous instances. The Moscow-based brokerage noted that this Gazprom has faced criticism for withhold-
was the first time that gas had exceeded oil in cost ing some supply from the European market,
save for in trading during the turbulence of the exacerbating the price spike, in order to put
2008 global financial crisis, and in a single day in pressure on EU decision-makers to approve
2018 amid plunging temperatures. Gas prices at the Nord Stream 2 pipeline. But some spec-
the TTF hub in the Netherlands, Europe’s biggest tators have blamed Ukraine’s offer of inade-
gas trading platform, have now reached $83 per quate transit tariffs that have prevented the
boe, which is 9% higher than oil, which is at $76 Russian company from sending as much gas
per barrel. as it would like.
Unlike in previous instances, VTBC said it Gazprom raised its gas production by nearly
believed the premium of gas over oil was more 18% to almost 279bn cubic metres between Jan-
sustainable this time around. This is because of uary 1 and July 15 this year. It estimates that its
low levels of gas storage, with storage facility uti- European customers accounted for the largest
lisation at 23% and 17% below multi-year aver- share of that incremental supply, increasing pur-
ages in Europe for dry gas and LNG respectively. chases by over 24% to 107.5 bcm.
The climate agenda, which has led to the accel- There are also suggestions that Gazprom
erated phase-out of coal, is also an important might be contending with a supply crunch of its
consideration. own, with its production capacity already at full
Asian gas markets typically offer LNG utilisation. The company has not commissioned
exporters a premium, and this has exacerbated any major new green fields in Western Siberia
the price spike in Europe. VTBC estimated that since 2018. These leaves the company reliant on
LNG deliveries to Europe were 26% lower in July its large but mature fields such as Bovanenkovo
than in June, which in turn saw a 32% decline on the Yamal Peninsula to meet the demand
from the level in May. The future curve, it said, surge.
suggests that the European spot price might Gazprom’s next key new project is Kharas-
reach $480 per 1,000 cubic metres in the second aveyskoye, located not far from Bovankenovo.
half of the year. The field is due on stream in 2023 and is expected
“This implies a dividend yield of almost 18% to flow 32 bcm per year at its first-phase capac-
for Gazprom for 2021,” VTBC’s analysts said. ity. Development drilling at the site kicked off in
“Novatek benefits less from the stronger gas June last year. ™

Week 31 03•August•2021 www. NEWSBASE .com P7