Page 108 - RusRPTNov20

in the world’s energy balance in 2045, as compared with a share of 31.5% in 2019. ​The share of gas will rise to 25.3% in 2045 from 23.1% in 2019, and the share of coal to 26.7% in 2045 from 19.7% in 2019.
Rosneft CEO Igor Sechin wants to set up a system to allow Russian oil majors to buy and sell their production quotas under the OPEC+ deal​. When Russia agreed to new OPEC+ production cuts in April, Rosneft was hit the hardest. Russian oil firms distributed the unprecedented 19% cut in output (from February levels) proportionally, and as Rosneft produces 40% of Russia’s oil, it had to make the largest cuts. The firm decreased its output by 117,000 tons per day in May through June, which caused problems with fulfilling its long-term oil contracts. In a letter to Putin this spring, Sechin proposed a solution. A number of small, independent Russian oil producers were decreasing production due to low oil prices. Rosneft and other firms should be able to buy their production quotas from them, Sechin proposed. This would allow Rosneft to increase production without Russia violating OPEC+. The Rosneft CEO then went a step further: Rosneft can manage this new system as Russia’s quota operator, overseeing the distribution of production volumes among firms. The proposal doesn’t seem to have gotten far, however. The Ministry of Energy opposes the idea.
Gas prices in Europe rebound beyond $180/kcm while oil prices might turn up under pressure. ​TTF spot gas prices have increased to USD 186/kcm, Kommersant reports. The November contract has grown to USD 187/kcm. At the same time, oil prices might rise under pressure as oil sector labour disputes are resolved and production resumed in Norway, production increases in Libya, and production resumes in the US after being stopped due to the hurricane Laura. The growth in gas prices in Europe was made possible by flattish LNG supplies to the region, which have fallen a marginal 1% in September-October to date vs. August, but in general have been declining in recent months, dropping 10% vs. the summer. Natural gas storage in Europe is now 96% full, which is higher than the seasonal average, but within historical bounds (unlike the summer months, when storage utilitisation was at historical highs). Higher gas prices, as well as lower LNG imports to Europe, are positive for Gazprom's profitability in the coming months. Still, the rebound in gas prices might lead to a recovery in LNG imports, we think, which, in turn would likely keep gas prices from appreciating further.
European spot gas prices have been recovering since August from the trough in May-July. ​European spot gas prices approached $5/mmbtu. This has come on the back of a combination of factors including lower LNG supply from the US, lower North American gas output and stronger consumption with the heating season approaching. Since the end of July, the TTF day-ahead price has surged 168% to $4.8/MMBtu and the TTF one-month-ahead price 161% to $4.8/MMBtu. The Henry Hub price has risen 62% to $2.9/MMBtu. The growth in spot gas prices does not have a major impact on Gazprom's 3Q20
108 ​RUSSIA Country Report​ November 2020 www.intellinews.com