Page 14 - FSUOGM Week 22

FSUOGM PIPELINES & TRANSPORT FSUOGM
Turkey cuts Russian gas supplies further in March
TURKEY
Gazprom has struggled to defend its market share in Europe over the past year.
TURKEY steeply cut its imports of Russian gas in March, data published from Turkish energy regulator EMRA shows, continuing a trend that began last year.
Russia’s Gazprom sold 389.7mn cubic metres of gas to Turkey in March, marking a 72% year- on-year decline. It consequently lost its position as the country’s top supplier, with its share of the Turkish market shrinking to 9.9%, from 32.6% a year earlier.
Replacing Russia was Azerbaijan, which ramped up supplies by 19.6% to 924.3 mcm, giving it a 19.6% share of the market. Turkey’s LNG imports from the US soared fourfold to 370 mcm. The country also doubled LNG shipments from Qatar to 786.2 mcm, and unlike a year ago, also bought super-cooled gas from Cameroon and Egypt, with supplies totalling 97 mcm and 92.3 mcm respectively.
Gazprom has struggled to defend its market share in Europe over the past year from rival LNG suppliers. The collapse in global LNG spot prices has in some cases made LNG more com- petitive than Gazprom’s supplies, some of which
are indexed to oil prices with a time lag.
All of Russia’s supplies to Turkey are oil-in- dexed, making LNG a far more attractive option at present. The steep decline in oil prices that occurred in March should feed into Gazprom’s supply contracts within the next six months, however, making its gas more competitive again.
Turkey’s overall gas imports fell by 8.3% y/y in March to 3.94bn cubic metres. This decline was caused by general economic weakness, the impact on demand of urban lockdowns imposed towards the end of the month, and a drop in gas- fired power generation.
Besides Russian supplies, Turkey also reduced imports from Algeria by 25.3% to 540 mcm, from Iran by 33% to 558 mcm and from Nigeria by 14.3% to 389.7 mcm. In Iran’s case, volumes were affected by a cross-border pipeline being taken out of action in late March by an explo- sion, which Turkish officials say was caused by Kurdish PKK terrorists. Iran has complained to Turkey about its failure to repair the pipeline.™
PERFORMANCE
Gazprom Neft swings to loss in Q1
RUSSIA
Gazprom Neft suffered impairments and foreign exchange losses, like its peers.
RUSSIAN oil producer Gazprom Neft posted weaker than expected results for the first quar- ter, swinging to a net loss on weaker prices and hefty asset impairments and foreign exchange losses.
The oil arm of Russia’s national gas company Gazprom reported RUB81.4bn ($1.09bn) in EBITDA for the three months ending March 31, down 54% year on year and 49% quarter on quarter. The figure was 30% below VTB Capital’s (VTBC) forecast and 5% below the consensus, the bank said in a research note on May 29.
Revenues were down 12.2% y/y at RUB514.6bn, as the impact of a 7.3% growth in production to 2.02mn barrels of oil equivalent per day (boepd) was more than offset by lower prices. Oil benchmarks collapsed in March after OPEC+ talks broke down and as demand fell because of coronavirus (COVID-19) lockdowns.
Gazprom Neft’s free cash flow plummeted 74.5%, landing at RUB22.1bn.
The company also suffered impairments and a RUB37bn foreign exchange loss caused by the ruble’s devaluation, leading to it booking a net loss of RUB13.8bn, versus a RUB107.9bn profit a year earlier. Fellow Russian producers Rosneft
and Novatek also slipped into the red in the first quarter, for similar reasons.
Gazprom Neft was “quick to respond” to the pandemic and the resulting shock to oil demand, its CEO Alexander Dyukov said, “launching its integrated wide-ranging antivirus programme aimed at protecting the company and its employ- ees from COVID-19.”
“This has made it possible to avoid mass out- breaks at Gazprom Neft facilities, maintain the company’s continuous operations and produc- tion, and support the regions in which the com- pany operates,” he said.
Gazprom Neft and its peers are in for a tougher second quarter, with oil prices remain- ing depressed despite lockdowns easing and pro- ducers cutting supply. Under the new OPEC+ deal, Russian producers are having to make big- ger cuts than ever before. VTBC expects Gaz- prom Neft’s liquids output to decline by 7% y/y in 2020.
Gazprom Neft told investors it intended to reduce the investment programme of its oil busi- ness by 20%. VTBC sees its full-year overall cap- ital expenditure shrinking by around 25% from its initial guidance, to RUB335bn. ™
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Week 22 03•June•2020