Page 8 - AfrOil Week 22a 2020

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Meanwhile, US lawmakers are seeking to impose additional sanctions on Gazprom’s Nord Stream 2 gas pipeline to Germany, in a last-ditch attempt to prevent the project’s completion. US Senators Ted Cruz, a Republican, and Jeanne Shaheen, a Democrat, are reported to be planning to intro- duce a bill this week containing new measures.
Further US pressure is unlikely to make a difference at this stage. Sanctions imposed by Washington last December led to Swiss-based contractor Allseas abandoning the pipeline, with just 6% of its offshore section left to complete. Russia is preparing to finish the job with its own pipelaying vessel, which is currently moored at a German port. It is hard to see how additional sanctions could therefore thwart construction.
Washington could threaten measures against companies hoping to buy gas supplied by Nord Stream 2. But Germany would strongly oppose such a move, viewing it as US interference in what Berlin has insisted is “a purely commercial project.”
If you’d like to read more about the key events shaping Europe’s oil and gas sector, then please click here for NewsBase’s EurOil Monitor.
Further Russian losses
Gazprom Neft has become the latest Russian oil and gas producer to post a net loss for the first quarter on low prices and ruble devaluation. Rosneft and Novatek also slipped into the red for similar reasons.
While blessed with low production costs, Russian companies are having to cut their cap- ital expenditure to protect their earnings, much like their international peers. After all, the profits of state firms serve as a key source of revenue for the Russian government. VTB Capital (VTBC) expects Gazprom Neft to reduce its full-year overall capital expenditure by around 25% from its initial guidance, to RUB335bn ($4.8bn).
Despite the market collapse, parent company Gazprom is counting on strong gas demand growth in the long run. It recently launched the planning phase for a second pipeline to China,
and also revealed last week it had resumed devel- opment studies for the offshore Shtokman gas field in the Russian Arctic – a project it tried to advance for more than a decade before shelving it in 2013.
Gazprom’s reappraisal of the high-cost and challenging project is oddly timed, given that global gas prices are at their lowest level in decades.
An investigation by Russian news outlet Lenta.ru has meanwhile cast doubt on Gaz- prom’s ability to deliver on its existing supply commitments to China. The report claimed the company risked losing $20bn and would strug- gle to fulfil its 2014 supply deal with China’s CNPC after overestimating the capacity of its production sites in Eastern Siberia.
In Kazakhstan, Chevron has announced that 20,000 workers, or two-thirds of the workforce, at the giant Tengiz oilfield will be demobilised following a COVID-19 outbreak. The move will likely affect work on an expansion project, which is already running a year behind schedule.
If you’d like to read more about the key events shaping the former Soviet Union’s oil and gas sector, then please click here for NewsBase’s FSU Monitor.
LNG giant pushes ahead
Even as US LNG exports decline, the backers of the Golden Pass LNG project, which is under construction in Texas, have requested author- isation to expand the capacity of the terminal. This is perhaps not surprising, considering the project is majority-owned by Qatar Petroleum (QP), which is also aggressively pursuing the expansion of its domestic LNG export capacity. QP owns a 70% stake in Golden Pass LNG, while ExxonMobil holds the remaining 30%.
The partners are seeking permission to boost the capacity of Golden Pass LNG to 18.1mn tonnes per year, from 15.6mn tpy previously. They say the increase “does not involve any equipment changes or environmental permit adjustments”, and would be achieved via “pro- duction efficiencies”.
An investigation has cast doubt on Gazprom’s ability to deliver on its existing supply commitments to China
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w w w . N E W S B A S E . c o m Week 22 03•June•2020