Page 7 - FSUOGM Week 04 2020

FSUOGM PIPELINES & TRANSPORT FSUOGM
Gazprom’s gas sales to Europe set for 25% decline in January
RUSSIA
Gas storage inventories in Europe are near an all-time high.
RUSSIA’S piped gas supplies to Europe are slated to plunge to a five-year low this month, Interfax reported on January 24 citing transmission data, amid warm weather and record volumes of gas in storage.
Gas storage inventories in Europe are near an all-time high, after Russia’s gas pipeline monop- oly Gazprom and other European companies stocked up on supplies last year to safeguard against a potential halt to Russian gas transits via Ukraine on January 1, 2020. A disruption was ultimately avoided, as Gazprom was able to cut a new five-year transit deal with Ukraine’s Nafto- gaz at the 11th hour of negotiations.
Gazprom is eager to offload the gas it already has in storage in Europe. As such, its shipments to the continent are projected to fall by 25% year on year this month to 13.0-13.3bn cubic metres, Interfax calculated, based on the statistics of transmission system operators (TSOs). This marks the lowest monthly amount since 2015.
Supplies were down 20% y/y in the first week of January, according to Interfax.
On paper, Gazprom’s gas shipments to Europe and Turkey remained strong last year, totalling 199 bcm – just 2 bcm less than the record set in 2018. However, around 30 bcm of this gas was put into storage rather than used by consumers.
Gazprom faced increased competition in Europe last year from LNG suppliers, which delivered a record 76m tonnes of the super- chilled gas, driving down prices. Average prices at the Netherlands-based TTF, Europe’s largest gas trading point, were down 38% last year at $4.9 per mmBtu.
This has hurt Gazprom’s earnings, with reve- nues from its gas exports dropping 15% last year to $37.74bn. The company sold its gas to the EU at an average price of $169.8 per 1,000 cubic metres in 2019, versus $250 in 2018.
European prices are predicted to slide fur- ther this year, as the continent’s LNG imports continue rising as a result of new supply com- ing on stream and bearish market conditions in Asia. ™
Georgia delays completion of GTU
GEORGIA
Georgian gas demand has risen steeply and is projected to reach 5 bcm in the next few years.
GEORGIA has once again pushed back the com- pletion date for its first underground gas storage (UGS) unit – a project aimed at protecting the small Caucasian country from disruptions in gas supply.
The CEO of state-owned Georgia Gas Storage Co. (GGSC), Imeda Kakhiani, revealed to local reporters last week that the facility was now expected to start up in 2024 – two years later than the previous schedule. He blamed the “complex nature of the project” for the delay.
Georgia first drew up plans for the UGS facility more than a decade ago. But the pro- ject only started to gain traction in the last five years, following a steep growth in Georgian gas consumption.
The facility is to be built at the depleted Sovi- et-era Samgori oilfield, situated just 30km from Georgia’s capital Tbilisi. Samgori is also near the route of the South Caucasus Pipeline (SCP) which carries gas from Azerbaijan, Georgia’s main supplier.
Progress on the project has been slow, largely because of difficulties with financing. A key breakthrough came in August 2018, when Ger- man development bank KfW agreed to provide a $150mn loan to fund construction. Georgia
hopes to secure a further $100mn from the Euro- pean Investment Bank (EIB).
The project’s total cost is yet to be finalised, although a feasibility study undertaken several years ago estimated its expense at $270mn. The project would be capable of storing 210-280mn cubic metres of gas, according to this study.
Georgia is currently in the process of select- ing a contractor to build the facility.
“To date, quite a large amount of work has been done. The tender for the selection of ...a contractor has actually come to an end. We assume that in the first quarter of 2020 a tender winner will be identified who is able to begin the first phase of construction work in the second quarter,” Kakhiani said.
Georgia currently consumes around 2.5bn cubic metres of gas each year, around 95% of which comes from Azerbaijan, with the rest supplied by Russia. Authorities expect demand to reach 5 bcm in the next few years, as a result of a nationwide gasification programme.
The country’s overdependency on a single supplier creates risks, as evidenced in mid-2017, when pipeline repairs knocked out supplies from Azerbaijan’s Shah Deniz field, forcing the coun- try to buy emergency volumes from Russia.™
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