Page 77 - RusRPTAug20

said that the potential creation of the Forum of Gas Exporting Countries (​an intercountry agreement analogous to OPEC) might help the global gas markets during times of crisis, Vedomosti reports. This idea was reiterated by Minister of Energy Alexander Novak
Denmark has approved the request from Nord Stream 2 AG to use anchored pipe-laying vessels for the construction of the Nord Stream 2 pipeline​ in Danish territorial waters. Previously, Denmark’s permit only included vessels with a dynamic positioning system, which significantly narrowed the range of the available options for the project. The new permit can be appealed by the Danish Energy Board of Appeals until 3 August, which could delay the resumption in construction. The inclusion of anchored vessels in the Nord Stream 2 permit widens the choice of vessels that can be used to complete the construction, which is, in essence, supportive. In particular, Gazprom might be able to use the Fortuna vessel with anchor positioning for the project. We note that the successful launch of Nord Stream 2 would imply upside for Gazprom's investment case, as almost all project-related investments have already been made, we believe. In our model, we assume the pipeline is to start its operations in 2022.
Gazprom​ thinks that European spot prices have already rebounded from absolute lows ​and expects more visible balancing trends in 4Q20. The average 2020 European export price is guided at $133/kcm, with export volumes of 166-167bcm. Capex optimisation (announced during the 4Q19 call) was not significant in 1Q20 but is to become visible in 2Q-4Q20. 2020 capex for Gazprom Group is to stand at RUB1.3tn. Cost-cutting plans were reiterated. In particular, Gazprom guides for a RUB140bn opex cut and RUB200-220bn capex cut (relative to the initial plan) for the gas business alone. Cost reduction will not impact production plans and the security of gas supplies. Additionally, 20% cost cuts are planned for the oil and power generation businesses. In 1Q20, Turkey reduced gas purchases from Gazprom 15% y/y, while in 2Q20 COVID-19 and the intensifying competition with LNG affected Gazprom’s deliveries badly. However, the situation has started to improve, so the company expects FY20 deliveries to Turkey to be at FY19 levels. The decision on domestic gas tariff indexation has been made in principle and is being formalised. The FID on the Ust’-Luga plant was made in March 2019, the key technical decision has also been made and the project documentation is being prepared. The price for the EPC project is to be finalised in June 2021. A major pipe tender secured fixed price pipe supply for the company for 2021-22 (a realised price reduction of 3%). The tender was won by five key Russian LDP producers simultaneously without intermediaries on FAS’s recommendation. Gazprom envisages four potential ways to expand deliveries to China: +6bcm via Power of Siberia, from the Russian Far East, via the pipeline through Mongolia and the Western route.
German Chancellor Angela Merkel has criticised the potential US sanctions against the Nord Stream 2 project, ​saying they are not in line with the understanding of law in Germany, RBC reports. This follows a similar statement by the Minister of State at the Foreign Office, Niels Annen. At the end of June, a group of US senators proposed further sanctions on the Nord Stream 2 project and included them in the National Defense Authorization Bill for 2021. The new sanctions law would expand the existing sanctions onto a broader group of contractors participating in the construction of the Nord Stream 2 and TurkStream pipelines.
77​ RUSSIA Country Report​ August 2020 ​ ​www.intellinews.com