Page 5 - FSUOGM Week 36 2021

FSUOGM COMMENTARY FSUOGM

bcm in H1 2021, up from 98.2 bcm a year ear- Nord Stream 2
lier. And the company said in its earnings call it Gazprom is eager awaiting the launch of the
might fast-track some upstream projects to meet Nord Stream 2 pipeline so that it can boost sup-
the growth in demand. plies to Europe and further down the line, divert
some transit volumes away from Ukraine.
Dividends and capex But the EU has placed a major obstacle in
In light of the spike in its earnings, Gazprom front of Nord Stream 2’s path. Brussels intro-
has declared a dividend payment of RUB845bn duced an amendment to its gas directive in May
($11.5bn), or RUB17.85 per share, for the first 2019 to extend EU market liberalisation rules
half, which is more than was paid out during the to pipelines to and from third countries such as
whole of 2018, a year that set a record for div- Nord Stream 2. And in late August, Gazprom
idends. It has pledged a payout of no less than failed to get Nord Stream 2 an exemption from
RUB36 per share for the full year. these rules in a German appeals court.
Gazprom has set a capital expenditure tar- Essentially, Gazprom may have to unbundle
get of RUB1.832 trillion for 2021, after revising the pipeline and/or provide some of its capacity
it downwards slightly. The company invested to other Russian suppliers. But under Russian
record amounts while it was building its Power law, only Gazprom is allowed to export gas via
of Siberia, TurkStream and Nord Stream 2 pipeline. This means Gazprom will unlikely be
export pipelines to secure increased market able to use all of the pipeline’s 55 bcm per year
share overseas. But after finishing most of the capacity, undermining margins and forcing
pipelaying, the company promised investors last the company to rely on Ukraine for transit for
year leaner spending habits, pledging to keep longer – an outcome that the EU is banking on.
capex at around RUB1.2 trillion annually over The court ruling may also mean the Nord Stream
the next decade. 2 operating company cannot be certified as an
Investors have some reason to be sceptical independent transmission operator, preventing
of this, as Gazprom has traditionally struggled its launch.
with cost overruns and has often been pulled Russia’s state oil producer Rosneft is seeking
into expensive Kremlin-backed projects viewed to capitalise on Gazprom’s misfortunes. Rosneft’s
as having national importance. Major new pro- head and Russia’s most influential oilman, Igor
jects are already on the horizon, such as the Sechin, reportedly wrote a letter to Russian Pres-
$13bn Ust-Luga gas complex that will ship LNG ident Vladimir Putin recently, requesting that his
overseas. Gazprom began construction on the company be allowed to send 10 bcm per year of
facility in May, and Gazprom hopes it can start gas to Europe using Nord Stream 2.
production by 2026. Under Sechin’s plan, Gazprom’s monopoly
A more distant prospect is a second Power over pipeline gas exports would technically
of Siberia pipeline that Gazprom has proposed remain in force. Rather, Rosneft would sign an
building to China via Mongolia. But the project agreement under which Gazprom would serve
is still only at an early stage of planning, and it as an agent for exporting its gas. Were Rosneft
could take many years for Moscow and Beijing to succeed in gaining access to Nord Stream 2,
to agree terms for gas supply via the pipeline, though, this would create a crack in Gazprom’s
if at all. It notably took over a decade of nego- monopoly that Rosneft and other independ-
tiation for Gazprom to reach a $400bn gas deal ent producers could work aggressively to make
with China’s CNPC to underpin the first Power wider over time.
of Siberia. Rosneft has been building up its gas business

Fortune, one of the
vessels tasked with
building Nord Stream 2.

Week 36 08•September•2021 www. NEWSBASE .com P5