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FSUOGM COMMENTARY FSUOGM

Gazprom’s European exports

plunge, boosting China’s appeal

The Russian gas giant’s sales to European buyers tanked in the first
half of the year, a result that will likely strengthen the argument

for the construction of a second export pipeline to China

RUSSIA GAZPROM’S revised plans to export 166.6bn Gazprom has already reduced its export tar-
cubic metres of natural gas to Europe this year get once this year, trimming its projections by
appear to be in trouble after a dismal first half 16% y/y in April.
WHAT: that saw the Russian gas giant produce less than “Our volume figures for export are at the level
Gazprom’s gas exports half that figure. of 166.6 bcm and the average annual price fig-
to Europe fell 18% y/y to The company is under a unique set of pres- ure is $133 per 1,000 cubic metres,” Gazprom’s
78.94 bcm. sures, the likes of which it has never faced. The Finance and Economic Department head, Alex-
coronavirus (COVID-19) pandemic derailed ander Ivannikov, said at the time.
WHY: global demand earlier this year and Gazprom’s While the European market is experienc-
The COVID-19 pandemic major buyers in Europe are still struggling to find ing a gas glut, Gazprom believes demand will
coupled with rising their feet. start recovering from the third quarter. Market
competition depressed The situation reinforces the case for an observers are not so confident.
the major’s sales. expansion of export capacity targeting eastern “June data affirms gas markets remain out
markets, with China already witnessing an eco- of sync with oil markets. The reported $82 per
WHAT NEXT: nomic recovery. While the Chinese demand out- mcm average selling price is below Gazprom’s
Russia may be more look remains uncertain in the short term, with accounting breakeven level of c$100 per mcm
receptive to Chinese gas some industry watchers projecting flat demand (as per Kommersant), although above its cash
price demands in future growth for this year, the longer-term prospects breakeven of c$75 per mcm (our estimate),” BCS
negotiations. for supplies to the Asian giant are far stronger. Global Markets said in a note.
It added: “By our forecast, Gazprom will likely
Sales pressure report $5bn of European export revenues in each
Gazprom revealed on August 13 that its gas of the 2nd and 3rd quarters of 2020 including
exports to Europe, including Turkey, shrank by trading revenues, the lowest in over 15 years.”
18% year on year to 78.94 bcm from 96.43 bcm BCS GM noted that while hub prices in July
in the same period of 2019. and August had improved, they were still low
The slump in shipments showed up in the and pointed to the Netherlands TTF hub’s c$94
company’s export revenue, which plunged 51% per mcm as an example.
y/y to $11.3bn in the first six months of this year, The investment said it expected the gas mar-
Kommersant reported last week, citing Federal ket to return to balance by 2023, with even 2021
Customs Service data. looking “much better than 2020”.

P4 www. NEWSBASE .com Week 33 19•August•2020