Page 107 - RusRPTAug21

from last year’s pandemic affected levels is more modest than the rebound in prices, and partly because Gazprom’s earnings are substantially more sensitive to prices than to volumes. Regardless, rising volumes, while of secondary importance to prices, will still boost the company’s earnings y/y in 2021. Keep in mind that the current-year export numbers are being helped by exports to China, which did not exist in 2018. For comparison’s sake, our model currently assumes a full-year average export price of $230/mcm and 185bcm to Europe, and 11bcm at $205/mcm to China (Chinese prices are oil-linked with a relatively long lag period built into the formulas, so this price will end 2021 far higher than it began it). After grossing c$27bn in exports to Europe and China last year (excluding European trading activities), we estimate Gazprom will gross closer to $45bn of exports in 2021e. Our EBITDA estimate of $36bn for 2021e appears to have upside risk at this point.
The price of Russian Urals oil in Europe has increased by 1.5 times since the beginning of the year, to more than $74 a barrel, RIA reports. In absolute terms, the cost of this type of gasoline hit its highest level since October 2018 at the end of last week, Diana Mukhametzyanova, editor of Argus Oil Export has noted. According to the editor, the price of Urals in North-Western Europe climbed by $25.63 per barrel, or 53%, to $74.01 per barrel on June 29 compared to the beginning of the year (with delivery in the port of Rotterdam ). Simultaneously, on June 25, it achieved its highest level since October 2018 – $74.75 per barrel. Furthermore, the cost of 80-100 thousand tons of Urals in the Mediterranean climbed by $24.63 per barrel, or 49%, to $74.81 per barrel during this time period (with delivery to the port of Augusta). The indicator also hit its highest point since October 2018 at $75.55 a barrel at the conclusion of last week. Thus, compared to the beginning of the year, the discount on Urals in North-Western Europe grew by $0.2 per barrel, to $1.8 per barrel. The discount in the Mediterranean was a dollar per barrel, compared to a premium of $0.2 per barrel at the start of the year.
Russia’s oil and gas sector accounted for 15.2% of the country’s GDP in 2020, down from 19.2% in 2019, according to a Rosstat official. By comparison, oil and gas comprises 8% of U.S. GDP and 50% of Saudi Arabian GDP. This comes as President Putin emphasized last year that Russia is already on its way to diversifying its economy, recently acknowledging the impacts of climate at his Direct Line event with the Russian people. The contribution of oil and gas to the Russian economy in 2020 came out to 16.3 trillion rubles ($220 billion). According to an analysis by RBC, the Russian state is only counting production of crude oil, natural gas, and production of processing instruments -- or about 72% of the total oil and gas sector in Russia. Crude petroleum, petroleum gas, and refined petroleum, continue to account for over half of Russian exports.
The European Union court has rejected Germany’s appeal and upheld the decision of the court of the first instance from 2019 regarding Gazprom's access to the OPAL gas pipeline, which was made in favour of Poland. Germany had objected against the increased usage of the pipeline by Gazprom to 90%, according to the European Commission decision as per Germany’s request back in 2019, and requested that utilisation be reduced to no more than 50% of OPAL’s capacities. This decision cannot be appealed, according to Kommersant. The restriction on the use of OPAL’s capacities to no more than 50% has been in place for going on for several years.
107 RUSSIA Country Report August 2021 www.intellinews.com