Page 4 - FSUOGM Week 36 2021

FSUOGM COMMENTARY FSUOGM

Gazprom rides surge in gas

prices, but risks lie ahead

Gazprom and other Russian oil and gas majors are mindful of being left

behind in the energy transition

RUSSIA RUSSIA’S national gas champion Gazprom is on itself has driven gas prices by intentionally with-
track to pay out record dividends this year, after holding supply, exploiting its position as the
WHAT: riding the surge in European gas prices during continent’s number one supplier. Some market
Gazprom performed well recent months. But despite its financial num- watchers say it has done so not only to sell its
in Q2, achieving three bers, Gazprom faces risks ahead with the fate gas for more, but also put pressure on the EU
times higher profits than of its Nord Stream 2 pipeline still hanging in the to allow Nord Stream 2 to go ahead. But others
a year earlier. balance, while its rival Rosneft takes advantage point to Ukraine offering unfavourable tran-
of the company’s troubles to push for access to sit conditions. Causing further unease among
WHY: the European gas market. market players, Gazprom’s export arm stopped
The company has gained offering delivery options for 2022 on its Euro-
greatly from the price Bullish demand, constrained supply pean electronic sales platform (ESP) last month,
spike in Europe. Gazprom’s net income tripled year on year to without explanation.
RUB521bn ($7bn) in the three months ending In any case, contributing to the supply crunch
WHAT NEXT: June 30, on the back of a rebound in gas demand was a fire that broke out in early August at one
Gazprom faces supported by economic recovery, extreme of Gazprom’s key gas processing plants in West-
headaches with Nord weather and increased storage injections. At the ern Siberia, knocking out one of the 42bn cubic
Stream 2, pressure from same time, supply has remained constrained. metre per year facility’s three trains. However,
Rosneft, and energy The company sold its gas on average for Gazprom told investors in a conference call on
transition challenges. RUB15,469 ($211) per 1,000 cubic metres in September 1 that it did not envisage the fire hav-
Europe in January to June, versus only RUB9,475 ing any impact on full-year production, which it
a year earlier. And it can look forward to even expects to exceed 510 bcm.
wider margins ahead, with the tightening mar- Whether it is keeping some supply back or
ket having pushed wholesale gas prices at Euro- not, Gazprom’s sales to Europe are still much
pean hubs to over $600 per 1,000 cubic metres higher than they were last year, when corona-
in recent days. virus (COVID-19) restrictions weighed down
There is some debate over whether Gazprom on demand. Its sales volumes increased to 120.6

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