Page 20 - FSUOGM Week 37

FSUOGM NEWS IN BRIEF FSUOGM

RUSSIA cut its 2020 investment budget significantly. 2H20 would allow Gazprom to deliver close
This is not news, given it was signalled on to its contractual obligations (5 bcm) this
Sberbank could lend over the company’s 2Q20 conference call," BCS year.
Global Markets commented on September
€2.7bn to Novatek's Arctic 11, seeing the expected news as neutral.
"However, this is an excellent example of
LNG-2 how Gazprom’s investment budget is flexible, EASTERN EUROPE
tending to remain close to operating cash
Russia's largest bank, state-controlled flow," BCS GM analysts stressed. Naftogaz presents plans
Sberbank, is ready to finance the liquefied VTB Capital (VTBC) on September 11
natural gas (LNG) project Arctic LNG-2 of gas reminds investors that the company earlier to increase hydrocarbon
major Novatek, Interfax reported citing the guided its revised group consolidated capex
the bank's deputy chairman of the executive at RUB1.3 trillion (lowered some 20% from reserves
board, Anatoly Popov. approximately RUB1.6 trillion), also seeing
According to Popov, the bank’s financing the news as neutral and expected. Ukraine's state-run oil and gas company
for the project might exceed the €2.7bn Naftogaz has presented details of strategic
provided to the first LNG project of Novatek areas and gas production projects to the
– Yamal LNG. Gazprom catches up on country's prime minister, Denys Shmyhal,
The Arctic LNG-2 project consists of three seeking to increase its resource base
liquefaction trains each capable of producing Power of Siberia sales in through the exploration of new fields and by
6.6mn tonnes per year (tpy) of LNG. The first developing the potential of new projects, the
is due on stream in 2023, while the second July-August company said on September 9.
and third are slated to begin operations in Naftogaz is ready to implement pilot
2024 and 2026. Russia's natural gas giant Gazprom increased projects in new production areas, mitigating
VTB Capital (VTBC) on September 11 gas deliveries to China via the Power of their risks for the entire market, the company
reminded investors that Novatek has recently Siberia (Sila Sibiri) pipeline from 8.6mn cubic said, adding that there are opportunities
announced that it has moved the signing metres per day in 1H20 to 11.8 mcm per day for deep drilling, tight gas and offshore
of the project financing for Arctic LNG-2 in July-August, Sberbank CIB wrote citing the operations in the Black Sea.
to 2021, while around 23% of the project’s Argus FSU Energy agency. However, Naftogaz stressed, in addition to
capital programme (guided at $20bn- As reported by bne IntelliNews, Gazprom these opportunities, the oil and gas industry
21bn) has already been financed by the reported its worst quarter in over a decade requires certain government decisions.
shareholders. in 2Q20, but the management remained These include signing PSA agreements
"Although the steep drop in spot LNG optimistic on the short-term outlook and that were won through competition more
prices and lack of interest among LNG reiterated the dividend policy. The company's than a year ago, introducing an incentive
buyers for long-term contracts might exports also showed a rebound in August. royalty for tight gas, and giving producers
provide some obstacles for securing project "The company's management previously access to the Black Sea Shelf and a number
financing, the support from Sberbank or stated that the contracted supply volume of large promising onshore fields. It is also
other Russian banks would be helpful for the via Power of Siberia to China was set at important to continue incentive royalties
project," VTBC believes, seeing the news as 5bn cubic metres this year, with 80% of this for conventional gas and simplify licensing
positive. volume (4 bcm) representing the take-or-pay procedures.
Novatek previously planned to attract minimum," Sberbank CIB reminds. “Domestic gas production should
$9bn-11bn in project financing for Arctic So far, Gazprom delivered 1.57 bcm become the basis for Ukraine’s energy
LNG-2 (around 50% of total capex). VTBC in 1H20, or just 31% of the total contract independence. Today we have free entry into
does not expect any immediate reaction on volume and 39% of the take-or-pay the EU gas market, which also contributes
the stock from the news and reiterates Hold minimum, with the reported July-August to the diversification of energy sources.
recommendation for Novatek's shares. volumes implying a 36% increase in daily Nevertheless, during our meetings with the
deliveries. Ukrainian President, we repeatedly raised the
Sberbank CIB notes that should these issue of enhancing domestic production. We
Gazprom to cut 2020 capex daily volumes remain in place until the end need to hold the relevant exploration works,
of this year, Gazprom's total gas deliveries to
complete partially implemented exploration
as promised China via Power of Siberia could reach 3.8 plans and start production quickly.
bcm in 2020, or close to the minimum take-
Meanwhile, the government exerts every
Russia's state-controlled natural gas or-pay obligation. possible effort to achieve this; and we also
giant Gazprom has said it will cut capital The bank expects a "considerable increase expect relevant legislative initiatives from
investment in 2020 from RUB1.1 trillion in the Chinese gas offtake via Power of MPs. I’m sure that together we will manage
to RUB955bn, Interfax reported citing the Siberia in 2H20 and particularly in 4Q20," to do the necessary work and increase
seasonal September adjustment of the full- but the prices of gas for the pipeline should Ukraine’s energy independence within a
year targets. decline in 3Q20 and in 4Q20, while Chinese short-term perspective,” Prime Minister
Sources in the company told Interfax that deliveries via the pipeline remain "among Denys Shmyhal said.
RUB200bn ($2.6bn) will be cut directly from the highest prices in Gazprom's export “Ukraine has opportunities to move from
the capex, and the remained sourced from portfolio". stagnation towards increases in production.
investments in joint ventures. All in all, Sberbank CIB expects that an However, new areas and projects that can
"As expected, Gazprom is preparing to increase in gas volume supply to China in deliver this result pose significant risks

P20 www. NEWSBASE .com Week 37 16•September•2020