Page 11 - FSUOGM Week 36 2019

FSUOGM PIPELINES & TRANSPORT FSUOGM
Azerbaijan seizes Russian gas market share in Turkey.
AZERBAIJAN
Turkey’s Botas is less enthusiastic about Russian gas because of destination clauses in its contracts.
NEW Azeri gas supplies were a factor in Russian gas exports to Turkey falling 36% y/y in the first half of this year.
Turkey’s gas imports from Azerbaijan surged 43% in the period following the launch of BP’s Shah Deniz II gas field in the Caspian Sea and the Trans-Anatolian Natural Gas Pipeline (TANAP) run by Azerbaijan’s Socar last year, according to data from Turkey’s energy market authority EDPK.
Low LNG prices, driven down by sluggish spot demand in Asia and rising gas output par- ticularly in the US, as well as the expansion of gas output and pipeline capacity from Azerbaijan, has helped some nations in southeastern Europe diversify suppliers, Reuters reported on Septem- ber 6 after assessing latest export data from Rus- sia’s Gazprom.
Turkey imported 8.1 bcm from Gazprom in the first half of this year, down from 12.7 bcm a
year earlier. Its reliance on Russian supplies fell to 35% of its needs from 49%
Gulmira Rzayeva, a research associate at the Oxford Institute for Energy Studies, was quoted by the news agency as saying one factor pushing Turkey’s Botas gas pipeline operator to reduce its reliance on Gazprom was the strict terms in the Russian firm’s contracts that prevented gas being sold on to other buyers. That requirement limits the Turkish state energy firm’s bid to turn Turkey into a regional gas hub, she said.
“The Russian contract has a destination clause, the Azeri deals from Shah Deniz stages 1 and 2 don’t,” she said.
Turkey’s LNG imports rose 12% in the first six months to 4.92mn tonnes, equivalent to about 6.7 bcm, Refinitiv Eikon data showed.
Ankara is also in talks with Sofia to supply any extra gas it receives from Azerbaijan to Bulgaria, Rzayeva said.™
INVESTMENT
Investors jump as Surgut oil major hints at unsealing cash pile
RUSSIA
Surgutneftegaz has suggested sharing some of its giant cash pile.
SHARES in Russian oil major Surgutneft- egaz (Surgut) jumped by 10% on the Moscow Exchange at the beginning of the week upon the publication of 2Q19 financials and reports that the company could start putting its noto- rious cash pile to work for the benefit of its investors.
The capitalisation of Surgut jumped by 10% to RUB1.36tn ($20.5bn) in Moscow. The surge was “driven by the creation of an investment fund to help monetise the company’s cash pile, which may bring value to shareholders,” BCS Global Markets commented on September 3.
According to Vedomosti daily, the company company previously announced the creation of the subsidiary, Rion, to invest in and manage securities. By the end of 1H19, Surgut’s cash pile had reached more RUB3.25 trillion, or 2.4-fold higher than its market capitalisation.
The move to utilise the potential of the cash reserve, which is comparable to that of the sov- ereign National Welfare Fund, could improve Surgut’s investment case that has been losing its dividend appeal owing to the ruble’s appreciation and Russia’s tight fiscal policy.
“We believe that the prefs [Surgut’s preferred shares] are underpinned by a clear dividend pol- icy that renders them clearly dependent on the RUB/$ rate (the weaker the ruble is, the higher the dividends are). We expect prefs to deliver a 9.5% DY [dividend yield] for 2019 if the ruble remains at the current 66.7/$,” VTB Capital com- mented on September 3.
Given the “reduced ruble volatility due to the budget rule, Surgutneftegaz’s preferred shares have become somewhat less attractive as a defen- sive asset, in our view,” Sberbank CIB analysts warned last month. BCS GM has a Hold recom- mendation on Surgut shares at a target price of $4.6.
As reported by bne IntelliNews, Surgut reported a net loss of $238mn in 1H19 under IFRS, with revenues declining by 7% to $14.3bn and Ebitda inching down by 2% to $3.9bn.
As usual, Surgut had its results affected by currency fluctuations, with a 9% ruble apprecia- tion leading to $4.7bn FX loss and revenues div- ing on the decrease of the oil price in US dollar terms. However, Ebitda remained resilient owing to the positive export duty lag. ™
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