Page 8 - GLNG Week 47 2022

GLNG EUROPE GLNG

Gazprom unveils biggest

investment programme in eight

years as reorientates to the east

INVESTMENT GAZPROM announced a very large investment transport to Europe, although this part of the
package for 2023 as it ramps up spending next plan has likely been shelved. It will also pro-
year to RUB2.3 trillion ($35bn). The company is duce 3.6mn tpy of ethane and 2.2mn tpy of LPG.
preparing to embark on major capital-intensive Some of these liquids will be used as feed-
projects that may include new gas pipelines to stock at a nearby petrochemicals plant that Rus-
China and suggests Gazprom may be expecting gazdobycha is developing on its own.
higher earnings from gas exports to Europe than The company has also been instructed by the
analysts were expecting. Russian government to accelerate the national
The new investment package marks a 15% gasification programme, to bring more pipe-
year-on-year boost in the Russian state-owned line gas supplies to households, businesses and
gas supplier’s investment and was nearly 25% industries.
above the expectation of BCS Global Markets The brokerage notes that given Gazprom’s
(BCS GM), the Moscow-based brokerage said hard dividend policy of 50% of adjusted net
in a research note. income, the capital expenditure should have no
“This unexpectedly large budget could reflect implications for shareholder rewards.
a larger-than-expected slate of inflexible projects This represents Gazprom’s biggest capital
(Power of Siberia 1, regional gasification, Baltic spend since 2014.
LNG, etc, which could be somewhat negative,”
BCS GM said. “However, it could also represent a “We had included an assumed decline to
much more optimistic management assessment RUB1.85 trillion ($26bn) in our 2023e forecast,
of the outlook for the European market – and so this budget represents a material increase,
this cash flows – than we are allowing for, which both year on year and relative to our own
could be a neutral to positive signal.” assumptions,” BCS GM said. “The last time that
The gas pipeline Power of Siberia 1 is already Gazprom’s investments were higher was in the
pumping gas to China, but further investments 2010-2014 period, when outlays averaged $51bn
are underway to link up the Kovyktinskoye gas per year as the company completed a number of
field in the Irkutsk region to the pipeline, in order large pipeline projects and launched infrastruc-
to ramp up supplies to an eventual 38bn cubic ture and new fields on the Yamal Peninsula.”
metres per year. The brokerage assumed a drop in investment
After Gazprom’s ability to export gas to next year in light of a substantial increase in
Europe was seriously curtailed following the the tax burden placed on Gazprom, which the
explosions that disabled the two Nord Stream Russian government recently approved to help
gas pipelines in September, the company is shore up budget revenues, which have suffered as
looking to switch its gas distribution from west a result of Moscow’s war in Ukraine and Russia’s
to east. The Yamal Europe pipeline that runs subsequent economic isolation by the West.
through Poland to German has also been taken Russia’s finance ministry said in October 2022
offline earlier this year by sanctions. Russia recorded a small budget surplus (RUB
Russia announced this week that talks with 74bn, or $1.2bn in dollar equivalent) thanks to
Beijing on building a Power of Siberia 2 pipeline an extra infusion of cash from a special tax on
are already “actively” underway and could carry Gazprom (RUB416bn, or $6.9bn). The bottom
50bcm a year when completed in at least five line for the full year is still positive.
year’s time. It also factors in that the pipeline linking the
The $13bn Baltic LNG project is due on Kovyktinskoye field with the Power of Siberia
stream within a few years, following a final system was completed in recent weeks.
investment decision (FID) taken in 2019. The “However, the need to ramp production at the
complex in Ust-Luga – a joint venture between Kovykta field in the next three years, and perhaps
Gazprom and Rusgazdobycha – will handle 45 a requirement to install additional compressors
bcm per year of gas in total, producing, in addi- on the pipeline as that happens, may be serving
tion, LNG and 19 bcm of gas ready for pipeline to keep investment in that project temporarily

P8 www. NEWSBASE .com Week 47 24•November•2022