Page 11 - FSUOGM Week 04 2020

FSUOGM
NEWS IN BRIEF
FSUOGM
RUSSIA
Risks for Russian gas
majors as 2020 opens with
low gas prices
The European and Asian gas prices have continued their downward trend so far in 2020 and are now trading at historic seasonal lows of $3.50 and $4.10 per mmBtu (British thermal unit, or about 28 cubic metres) respectively, VTB Capital noted on January 21.
The analysts attributed the decline in prices to warm weather, high levels in underground gas storages and ongoing commissioning of new LNG facilities around the world and warned that the depressed price environment posed downside risks for Russian gas majors Gazprom and Novatek.
VTB Capital calculates that Gazprom could lose as much as $3.3bn, or 13% of the forecasted 2020 Ebitda, should the prices remain unchanged until the end of the year, while its dividend yield could drop below 5%.
“Although Novatek’s Ebitda is unlikely to be directly affected by lower LNG prices (the company simply resells Yamal LNG gas at a margin), Yamal LNG’s contribution to Novatek’s net income might fall $0.6bn,” VTB Capital estimates, referring to the first operational LNG facility of Novatek.
As far as the LNG market is concerned, the US boosted LNG exports 67% year on year to 37.5mn tonnes in 2019, with 14.5mn tonnes going to Europe (against only 3.2mn tonnes in 2018), VTB calculated.
At the same time, total European LNG imports also soared 69% y/y to 86.8mn tonnes, from 51.3mn tonnes in 2018, while at the same time “Asia is becoming awash with LNG.”
Novatek is eyeing Asian sales with its Arctic LNG projects and could see a problem of LNG oversupply in the once premium Asian market.
“Some LNG importers in the region are even starting to re-export contracted LNG volumes (Japanese Osaka Gas utility has recently issued tenders offering two LNG cargoes from US Freeport LNG project for delivery in Europe in July and November),” VTBC warned.
For now, however, about 80% of total Yamal LNG capacity is contracted under long-term offtake agreements with some link to oil prices, which VTBC expects to limit the impact from lower spotgas prices.
bne IntelliNews, January 22 2020
Russian Novatek reiterates
higher dividends, will
decide in 2Q20
Russia’s second-largest gas producer and global liquefied natural gas (LNG) runner-up Novatek will decide on improving its dividends in 2Q20, according to the CEO of the company and the country’s richest man, Leonid Mikhelson, as cited by Interfax.
The company’s ability to improve the dividends is currently limited by ongoing tests at Yamal LNG plants, as well as the obligation to have all LNG tanker carriers in operation in March-April (another third of the fleet was delivered in 2H19).
As reported by bne IntelliNews, uncertainty persists over the question
of state support for Novatek’s LNG transportation on the Northern Sea Route (NSR), but according to recent unconfirmed reports by the Kommersant daily, the Kremlin is close to swinging in Novatek’s favour.
After the company was allowed by the Kremlin to export LNG, it adopted an ambitious development plan and its capitalisation soared. “The reiteration of plans to improve dividends should be moderately positive, though they were already flagged last year,” Sberbank CIB commented on January 24.
However, Sberbank reminds that Novatek is more of a growth, rather than dividend, story and the main catalysts for the company’s reputation will continue to be the addition of new projects and their timely and efficient execution.
“At this point, Novatek shares have
the lowest expected dividend yield in the sector to be paid for last year (2%). Based on Mikhelson’s comment about the timing, a new dividend policy could start with the 1H20 payment,” the bank believes.
As far as the growth is concerned, Mikhelson said that the company might delay arranging $9bn-$10bn in project financing for the next LNG plant, Arctic LNG-2, to 2021, as it is looking for better terms. The fourth train at Yamal LNG
is expected to be launched in 1H20. Production of both natural gas and liquids is predicted to grow 1.5-2.0% this year.
“The indicated growth plans for this year look relatively conservative,” in Sberbank CIB’s view, taking into account the launch of the North Russkoye hub at the end of last year.
In the meantime, as reported by bne
IntelliNews, 2020 kicked off with lower gas prices, which could increase the rivalry between gas giant Gazprom (pipeline exports to Europe) and Novatek (LNG exports to Asia and Europe).
bne IntelliNews, January 27 2020
Gazprom ships first 1 bcm via TurkStream
Russia’s Gazprom has shipped 1bn cubic metres of gas via the TurkStream pipeline, including 54% sent to Turkey and the remaining volume delivered to the Turkish–Bulgarian border, the company said in a statement on January 27.
“Gazprom has shipped a debut billion cubic meters of gas. 54% of the volume was shipped to the Turkish gas market, and around 46% to the border between Turkey and Bulgaria,” the statement read.
The TurkStream pipeline consists of two branches with a length of over 900 kilometers and a total projected capacity of 31.5 billion cubic meters of gas. Commercial shipments via the facility began on January 1. Bulgartransgaz plans to build an extension of TurkStream to Europe by the end of 2020.
January 27 2020
Novatek to launch
hydrocracking unit at Ust-
Luga plant in Oct–Dec
Russian independent gas producer Novatek plans to launch a 1mn tonne hydrocracking unit at its Ust-Luga facility until the end of 2020, likely in October– December, Novatek Deputy CEO Mark Gyetvay told reporters on January 28
on the sidelines of the European Gas Conference.
“Hydrocracking should be launched until the end of the year. It is planned for the fourth quarter, I think,” he said.
The Ust-Luga facility processes stable gas condensate into light and heavy naphtha, kerosene, diesel fraction,
and a component of marine fuel. The hydrocracking unit should improve the depth of condensate refining and the output of light oil products.
January 28 2020
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