Page 12 - FSUOGM Week 48 2019

FSUOGM
FSUOGM
Transneft posts 30%
profit decline on Druzhba
compensations
Russian oil pipeline operator Transneft reported net profit decline of 30% quarter- on-quarter to $607mn under IFRS in 3Q19, while revenues gained 5% q/q and Ebitda 10%.
Despite the decline, the net profit still exceeded the consensus expectations by 14%. BCS Global Markets believes that the market has overestimated the amount of compensatory reserves due to the Druzhba contamination issue.
As reported by bne IntelliNews,
Transneft is resolving the issues with paying compensations for oil contamination in exports pipeline Druzhba and Ust-Luga port.
The pipeline operator is also locked in the conflict with domestic oil majors over diluting the contaminated oil from Druzhba that has been pumped back to Russia.
Ebitda in the reporting quarter outperformed the consensus by 5% due
to lower export duties and on the back of lower costs. About $500mn working capital release brought the free cash flow down by 25% q/q.
BCS GM maintained the Hold recommendation for Transneft with a target price of RUB180,000 per share.
bne IntelliNews, December 3 2019
EASTERN EUROPE
Germany to continue to
support Gazprom in Opal
pipeline access
While the European Commission will
not contest the EU’s Court of Justice
ruling on access to OPAL pipeline for Russian gas giant Gazprom, the decision will be appealed by German regulators, Kommersant daily reported on November 28 citing unnamed sources familiar with the situation.
As reported by bne IntelliNews, in September the EU Court of Justice imposed a 50% cap on Gazprom’s use of the 36
bcm per year OPAL pipeline in Germany, limiting future gas flows via Nord Stream 2 pipeline.
According to Kommersant, Gazprom cannot itself appeal the decision, as it is not formally the part of the process, while German Bundesnetzagentur regulator can indeed appeal.
Analysts and lawyers surveyed by the daily believe that the appeal of the decision could take two-three year, with the goal to grant Gazprom access to 80%-90% of the capacity of OPAL.
bne IntelliNews, November 29 2019
Ukraine, Russia sign 10- year oil transit agreement
Ukraine’s national oil transport company Ukrtransnafta has signed off on a 10-
year transit agreement with its Russian counterpart Transneft to carry oil via Ukraine’s pipeline network for the next decade, Ukrtransnafta said on Facebook on December 3.
“On December 3, 2019, Ukrtransnafta and Transneft entered into an additional agreement to the contract on providing
oil transportation services through the territory of Ukraine, which prolongs it for 10 years — from January 1, 2020, to January 1, 2030,” the company said.
However, none of the details of the deal were given. The deal has special significance as it comes only a few days before Ukrainian president Volodymyr Zelenskiy is due to
meet with his Russian counter party president Vladimir Putin in Paris where the two will talk about the more significant gas transit deal of Russian gas over Ukraine’s territory that is worth $3bn a year in revenue to Kyiv, or some 4%ofGDP.
Director General of Ukrtransnafta Nikolai Gavrilenko and Transneft Vice President Sergei Andronov signed the document. At the meeting, the parties also discussed the prospects for further cooperation, Ukrtransnafta added, Tass reported.
“Apart from prolonging the contract,
an additional agreement between Ukrtransnafta and Transneft will update a number of its provisions taking into account the current changes in the oil transportation services market in the region,” the company said as cited by Tass.
It was noted that the basic principles of cooperation between companies remain unchanged, including payment procedure for services and the mechanism of interaction at the level of technical services of the two oil transportation operators.
The report also emphasized that concluding the supplementary agreement “guarantees safe and stable operation of the oil transportation system of Ukraine on a long-term basis” and provides for loading the system of trunk oil pipelines with volumes of oil in the direction of European countries.
bne IntelliNews, December 3 2019
Naftogaz takes Gazprom case to Moldova
The national oil and gas company of Ukraine Naftogaz is seeking forced execution of a 2018 arbitration decision against Russia’s Gazprom in Moldova. If successful the decision would give it control over the Moldovan gas transport network currently controlled by Gazprom.
Naftogaz has filed a request with the Moldovan courts regarding the recognition and approval in Moldova of the forced execution of the arbitration decision of February 28, 2018, issued by the court of the Arbitration Institute of the Chamber of Commerce of Stockholm, against Gazprom, Mold Street reported.
Gazprom controls Moldova’s entire
gas transport system and most of its distribution network. It holds 50%
in country’s gas transport operator Moldovagaz. On the other hand, Moldovagaz has huge debts of around $6.2bn that almost entirely resulted from the non-payment for gas by the separatist republic of Transnistria — a political issue that, however, gives the Russian company relevant bargaining power when it comes to Moldova’s gas transport/distribution network.
In February 2018, Naftogaz won the lawsuit against Gazprom in the Stockholm arbitration court, the Russian group being forced to pay damages of $2.56bn for not fulfilling the conditions regarding the volume of gas transit through Ukraine. Since then, more than $250mn in interest has been added. As a result, the amount to be collected by Naftogaz from Gazprom is almost $3bn.
Recognition and approval of forced execution was so far refused in Moldova but not all the appeal procedures have been used by Naftogaz.
Naftogaz appealed to the Supreme Court of Justice (SCJ), whose examination has already been postponed three times.
The next meeting will be held on December 24, 2019.
To enforce the arbitral award, the Ukrainian company is trying to obtain
the recognition and enforcement of the decision of the international arbitration tribunal in various states, including Moldova, where Gazprom holds assets.
For example, in Luxembourg the court has already recognised the arbitration decision, but Gazprom has challenged it and the enforcement process is suspended.
“In other states, so far, we were not successful,” admitted Naftogaz’s executive director, Yuriy Vitrenko, in a radio interview. “In Germany, we cannot proceed
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Week 48 04•December•2019