Page 143 - RusRPTSept21

The previous contract between Gazprom and Panrusgaz JV was for 9bcm/a, with supplies mainly through Ukraine and, to a smaller extent, through Austria. The pricing formula has not been disclosed, but the paper’s sources suggest that the pricing might be tied to CEGH gas hub prices, while the Hungarian head of foreign relations mentioned that the new pricing was more favourable than under the previous contract. The contract covers around half of Hungarian consumption of Gazprom’s gas. Gazprom plans to supply the remainder through its trader, WIEE, on a short-term basis.
The chosen supply route highlights Gazprom’s preference for using new pipelines (TurkStream) over legacy routes. This is due to their cost efficiency, we think.
In 2020, Gazprom delivered 8.6bcm of gas to Hungary (which is 4.9% of the total export deliveries to Europe), while in 1H21, deliveries increased 5% y/y to 3.9bcm. This makes up the majority of gas consumption in Hungary (10bcm in 2020 per BP). While long-term contracts help to secure gas deliveries for Gazprom over a long period of time, we do not see there being lower contract volumes in the current situation, as Gazprom is also leaving some room for manoeuvre. Hence, we view the news as not market moving.
● Rosneft
Rosneft plans to double the volume of hydrogen production, Vedomosti reports with reference to the company's press service. The company is to produce up to 1.32mnt/a of hydrogen in 2023. According to Reuters, the company now produces more than 650kt/a of hydrogen. Hydrogen and CCUS are logical paths for the development of oil and gas companies globally and in Russia on the backdrop of the growing ESG and clean energy themes in particular. We note that, for now, Rosneft produces hydrogen for its own purposes in refining and, with regards to the expansion, it is not fully clear what technology is to be used and whether the hydrogen is going to be grey, blue or even green. Nevertheless, we think that, in general, this is a good development for Rosneft, which is going to improve its longer term fundamentals. In our view, any intention to diversify from pure hydrocarbon production to what has, of late, started to be considered as clean energy, might be appreciated by equity investors. However, we do not think this news is immediately market-moving for the company’s shares.
143 RUSSIA Country Report September 2021 www.intellinews.com