Page 6 - FSUOGM Week 42 2021

FSUOGM COMMENTARY FSUOGM

Gazprom ramps up gas output by

17% in year up to mid-Oct

Gazprom still faces criticism for not sending enough gas to Europe

RUSSIA RUSSIA’S state-owned gas supplier Gazprom additional volumes of gas to the European mar-
expanded production by 16.6% year on year to ket,” the CEO of Ukraine’s Naftogaz, Yueiy Vit-
WHAT: 399.4bn cubic metres (bcm) in the first nine and renko, said at a press conference on October 18.
Gazprom has increased a half months of this year, the company reported “Everyone understands that Gazprom is delib-
gas flow this year to near on October 18. erately delaying the supply of gas, blackmailing
record levels. Gazprom has boosted flow from its wells in Europe in order to obtain the Nord Stream 2
response to a strong rebound in European gas certification.”
WHY: demand this year, which coupled with con- Naftogaz has filed a request with German
The company is strained global LNG supply, has led to a supply regulator BundesNetzAgentur (BNetzA) to par-
responding to a spike in crunch and record prices on European gas hubs. ticipate in the process of certifying whether or
gas demand. On average the company produced 1.4 bcm per not the Nord Stream 2 operating company can
day in the year up to mid-October, versus 1.2 be classified as an independent transmission
WHAT NEXT: bcm in the corresponding period of last year and operator. This is needed for the pipeline, now
Gazprom may increase 1.3 bcm in the same period in 2018. technically ready, to start pumping gas on a com-
supplies further after Production in September averaged 1.363 bcm mercial basis. As Gazprom owns the pipeline
filling its domestic per day, rising to 1.374 bcm per day this month. and all the gas that flows through it, Naftogaz
storage facilities with Non-FSU exports rose 13% year on year to and other Nord Stream 2 opponents argues that
gas, although it has not 152.2 bcm, although this was down 3% com- the operator does not comply with EU liberalisa-
booked additional transit pared with the same period in 2018, when the tion rules on unbundling and third-party access,
capacity via Ukraine in company exported a record amount of gas. and therefore should not be certified.
November. Adjusting for shipments to China, which began Moscow-based Sova Capital notes that
in December 2019, non-FSU supplies came to Gazprom should report its Q3 RAS financial
152.2 bcm, down 4% from the level in 2018. figures for the third quarter at the end of this
Gazprom also noted steep year-on-year month, and its report “should confirm to the
increases in sales to Turkey, by 152.3%, Ger- market that Gazprom is exporting at a high
many, by 28.2%, Italy, by 16.3%, Romania, by level to Europe, as monthly operating releases
288.6%, Serbia, by 112.1%, Bulgaria, by 52.7%, are somewhat ignored by critics, likely bolster-
Poland, by 10%, Greece, by 12.9% and Finland, ing Gazprom’s argument that it is not holding
by 15.3%. back volumes.”
Despite strong export numbers for this year, The gas supply crunch in Europe has been
Gazprom has faced criticism for not sending exacerbated by low storage levels. According to
enough gas to Europe to ease the supply crunch, Gas Infrastructure Europe (GIE), EU gas storage
and some European lawmakers have even called facilities are currently only 77% full, which is 14
for an investigation into its alleged anti-com- percentage points below the five-year average for
petitive operations. However, by all accounts this time of year. Gazprom may boost supplies
Gazprom continues to stick to its contractual once it has finished filling its domestic storage
obligations, although it has refrained from sell- facilities at the end of this month, but the deci-
ing extra volumes on the spot market. sion not to book extra capacity through Ukraine
It is unclear how much spare production in November would suggest otherwise, analysts
capacity Gazprom has at the moment. But Rus- at VTB Capital estimated in a research note.
sian President Vladimir Putin hinted on October “With gas withdrawals already starting, we
13 that Russia was prepared to send more gas to should see hub prices remain high going into
Europe. But these sentiments are yet to translate the end of the year, which should benefit Gaz-
into actions. prom beyond its Q4-2021 results,” Sova said. “If
European gas prices jumped on October the average non-FSU export price for Q3 2021 is
18 after it was announced that Gazprom had lower than some expectations, given the lag in
refused to book additional gas transit capacity pricing dynamics, this could signal that the price
through Ukraine, indicating that no increase in from Q4 2021 to Q2-3 2022 will be strong, which
supplies is planned. Reuters estimates that Gaz- is in line with our current forecast of a non-FSU
prom is now sending only 86mn cubic metres export price of near $400 per 1,000 cubic metres
(mcm) of gas per day through Ukraine, or 21% for 2022.”
below its contracted ship-to-pay amount of 109 Sova expects Gazprom to issue a dividend of
mcm. more than RUB45 per share for the 2021 finan-
“Gazprom deliberately does not supply cial year, implying a 12% yield. ™

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