Page 126 - RusRPTMar21

· Gazprom’s net debt to EBITDA came slightly below 3x for 2020 (2.8x, subject to further clarifications).
Separately, Interfax writes that Gazprom has drastically cut the utilisation of the Ukrainian gas transit route from 17 February, to 88-95mcm/d (down from 116mcm/d in the first part of February and 124.5mcm/d in January). At the same time, European gas prices declined below $200/kcm.
Gazprom’s income from exports fell 39.6% y/y to $5.25bn in 2020,
according to data from Russia’s Federal Tax Service reported by TASS. Exports in volume terms were down 9.7% y/y to 199.2bcm, according to the data. Average prices for exports were $156.6/mcm in December 2020, $15.48/mcm in November 2020 and $145/mcm in October 2020. This averages out to $152.4/mcm, which is above the level of $140/mcm we expected for non-FSU exports in 4Q20. We think the average non-FSU export price in 4Q20 could surpass guidance.
Gazprom Neft increased the production of oil from hard-to-recover deposits 78% y/y in 2020 to 100kt, Vedomosti writes. Since 2017, when it started to develop the Bazhen deposits, the cost per ton produced there has been driven down from RUB30,000/t to RUB13,000/t. This happened due to Gazprom Neft’s own technological solutions, with 95% of equipment for wells produced domestically in Russia. By the end of 2021, the company intends to lower the cost still further, to RUB8,500/t, which would make this production profitable. This might allow the company to produce up to 1mnt of such oil by 2025, with further annual growth of 30%, according to the company. The cumulative investment by Gazprom Neft into Bazhen might reach RUB50bn by 2030. The company also intends to sell the technology to other companies.
Gazprom’s gas exports to Germany up 48% y/y in early February. This follows a bout of very cold weather in the region. This is positive news, if unsurprising. First: The year-on-year comparison is relatively easy, as Gazprom’s exports fell sharply in the first months of 2020. Second: Despite that caveat, Gazprom’s sales to the countries of Central Europe are expected to be strong in the month due to the development of very cold weather over the region, which should quickly warm this week. A sharp y/y jump in exports to Germany was expected due to easy comps and very cold weather. Expected or not, this is good news for GAZP, underlining just how much the European gas market has improved in the last three months.
· Gazprom is not planning to increase its capex program for 2021, even though the macro situation is better. Capex is planned at RUB 902bn for Gazprom and RUB 1.5trln for Gazprom Group.
126 RUSSIA Country Report March 2021 www.intellinews.com