Page 89 - RusRPTSept19

Novatek’s consolidated gas production (including its share in joint ventures) increased 4.1% y/y, thanks to the contribution from higher production at Yamal LNG (+62.8% y/y) and Arcticgas (+6.4% y/y).
Gazprom has produced 312bcm of gas since January 2019, up 1.7% y/y, which is a record high since 2011, Kommersant reports. Other Russian companies produced 431.9bcm of gas in January-July (+3% y/y). The growth was mainly driven by Novatek, which produced 40.9bcm during that period (+58% y/y) thanks to the ramp up at Yamal LNG, and Gazprom Neft, with gas production reaching 11.9bcm (+23% y/y), while Rosneft and Lukoil decreased gas output 3.9% y/y and 3.3% y/y, respectively.
Despite the significant increase in Gazprom’s gas production, its exports to Europe continue to decline: they were down 4.8% y/y to 111.5bcm in January-July. We therefore keep our forecast for the company’s supply to Europe at 191bcm (-5% y/y) in 2019F on the back of the relatively weak demand trends and jump in LNG supplies to Europe in 1H19, which almost doubled during the first half of the year. These, in turn, pushed gas prices down, with TTF at just 110/kcm (-61% y/y).
Poland reduced imports of Russian gas 28% YoY in 1H19 to 4.3bcm, as American LNG is 20-30% cheaper, Kommersant reports, citing PGNiG. According to the agency, Poland plans to concentrate on gas purchases from the US after 2022, when the contract with Gazprom expires. The country’s existing contracts imply that Poland will import around 0.52mmt/a of LNG from Cheniere through the end of 2022, and about 1.45mmt/a from Cheniere and 2mmt/a from Venture Global LNG for 20 years after 2022. In addition, 2.7bcm is to be imported from Qatar annually from 2022, according to the paper.
Separately, domestic gas demand was down 1.4% y/y in January-July.
Gazprom’s rising production can likely be explained by the active filling up of underground gas storage facilities, we think. This might not lead to a positive effect on the company’s financial performance unless gas demand or prices strengthen. Nevertheless, we believe that at this point investors might not be focusing solely on Gazprom’s financials but rather giving more attention to developments in the company’s corporate governance. Therefore, we deem the news as not market-moving.
Russian oil major Rosneft claims that state oil pipeline operator Transneft has failed to resolve all the issues with chlorine contaminated oil, Reuters reported on September 3 citing the announcement of Russia's largest crude oil producer. Exports and output of Rosneft and Tatneft oil companies suffered the most when this spring oil supplies through Druzhba pipeline and Ust-Luga port were botched by chlorine-contaminated crude. Rosneft had been hard-pressing the government and Kremlin for compensations, not only for Druzhba disruption, but also for lower output under the Opec+ output cut deal and Arctic extraction development.
US President Donald Trump’s sanctions against Iran and Venezuela have inadvertently increased demand for a Russian brand of crude oil, boosting revenues for the nation’s exporters by US $905mn between November and July, Bloomberg reported on August 16. The calculation is based on difference between the Urals spread to the Brent benchmark over the period compared to the five-year average. The sanctions added to a jump in demand for Russian crude in the wake of output cuts from OPEC and their partners. As a result,
89 RUSSIA Country Report September 2019 www.intellinews.com