Page 17 - FSUOGM Week 36 2022

FSUOGM NEWS IN BRIEF FSUOGM

potential disruption. two out of three CPC single-point moorings guarantee the delivery of up to 5.8 mcm
S&P said: “Against the backdrop of the for around a month. gas per day to Hungary in September and
uncertain geopolitical environment, in our “As a result [of the disruptions], we October above the volume stipulated in
view, Russia could disrupt flows through the expect Kazakh oil production of 85.6 the country's long-term contract signed in
pipeline to gain leverage against Kazakhstan million tons per year (equivalent to about October, Hungary’s Foreign Minister Peter
or the consumers of the oil, namely 1.8 million barrels per day [bbl/day]); this Szijjarto said.
countries in Europe that support Ukraine, is lower than our previous estimate of 87.5 Gazprom delivered an extra 2.6 mcm of
or to hurt Western interests in the Kazakh million tons for 2022,” S&P said. gas per day in August on top of its 15-year
oil sector (shareholders of the pipeline and It also stated: “In our view, geopolitical contract with the Russian gas giant, which
oil fields include Chevron, ExxonMobil, tensions caused by the Russia-Ukraine guarantees the annual supply of 4.5 bcm of
Shell, and TotalEnergies). In such an conflict could be the source of potential gas through Serbia and Austria, bypassing
event, disruptions at the pipeline could disruptions at the CPC pipeline… About Ukraine.
be unrelated to Russia's relationship with 90% of oil flowing through the CPC pipeline Hungary has been in talk with Moscow
Kazakhstan, but damaging nonetheless.” originates from Kazakhstan (representing in the summer to obtain an additional 700
CPC transits around 80% of Kazakhstan’s 54 million tons or about 1 million bbl/day), mcm of gas above the 4.5 bcm level.
crude exports via its pipeline that extends while the remaining 10% is Russian. Hungary has opposed proposals for EU
to the Novorossiysk terminal. It is the major “Alternative export routes to the CPC sanctions on Russian gas as well as calls for
export route for the key Tengiz, Kashagan pipeline can replace less than a third a voluntary 15% cuts in member states’ gas
and Karachaganak oilfields of Kazakhstan. of its capacity and are more logistically demand until the end of March next year.
All three oilfields are operated by foreign challenging and expensive.” The government has blamed EU sanctions
consortia. Oil is the key economic sector in for the soaring energy prices in Europe.
The pipeline is not subject to Western Kazakhstan, directly accounting for about It has gone against the rest of the bloc by
sanctions imposed on Russia in the wake of 15% of GDP, more than 30% of general continuing to deepen its reliance on Russia.
the invasion of Ukraine. government revenue, and over half of Viktor Orban's regime has boasted about
“If Kazakhstan's oil export capacity exports, according to S&P. how its good relations with Russia has given
reduced for a prolonged period, this could In addition to the difficulties with oil it favourable prices for gas and will enable
negatively affect external and fiscal metrics,” export, “the government's fiscal response it to ride out the current energy crisis.
S&P noted. this year to the civil unrest in early January However, it has not revealed the cost of its
As well as revising the outlook on could make it more challenging to curb gas deals with Russia, with an opposition
Kazakhstan to negative from stable, S&P spending growth from 2023,” said S&P. website claiming that the price is above the
affirmed its 'BBB-/A-3' sovereign credit It added: “Meanwhile, we expect lower market rate.
ratings on the Central Asian country. oil prices from 2024 will likely weigh on The Hungarian government has also
The negative outlook was also attributed revenue. We anticipate the government's been forced to end its freeze of domestic
to rising debt financing costs, the rating net asset position will turn into a small tariffs, one of its signature economic
agency said. debtor position from 2022, largely due to policies. Three months after his landslide
S&P added: “We could lower the ratings rising debt. At the same time, government April election victory, the Orban
over the next two years if Kazakhstan's borrowing costs are increasing, given government was forced to give up on its key
oil exports declined significantly for a the rising interest rates and reliance on policy as the budget gap widened and the
prolonged period, weakening the economy's domestic debt issuances. We project that forint weakened to historic lows.
external position and increasing fiscal interest as a proportion of revenue will Due to Hungary’s geography, being
deficits. This could be the case, for instance, average 9.8% over 2022-2025. a landlocked country, "it is physically
if the CPC pipeline's loading capacity were “The ratings on Kazakhstan are impossible to ensure Hungary's energy
incapacitated for an extended period. We supported by the country's strong fiscal supply without using and taking into
could also lower the ratings if inflationary and external balance sheets. These were account Russian gas sources", Szijjarto said.
pressures and rising borrowing costs built primarily with budgetary surpluses The additional volumes contribute to the
continued to increase the government's generated during the period of high safety of Hungary's energy supply, Szijjarto
debt-servicing burden. commodity prices that ended in late 2014. said, adding that there will be sufficient
“Further disruptive factors, such as The related assets were accumulated in gas in Hungary. Reserves in Hungary's gas
a deterioration in domestic stability, the National Fund of the Republic of storage facilities have exceeded 36.5% of
evidenced by incidents of severe civil Kazakhstan (NFRK) and largely invested annual average consumption, compared to
unrest, could also lead to a downgrade.” abroad. We forecast that the economy's the EU average of 21.5%. Gas reserves stood
There have been at least four incidents liquid external assets will exceed external at 61.3% of the total capacity of 6.33 bcm
this year affecting the CPC pipeline. These debt through 2025.” last week.
incidents include storm-related damage in Russia's Gazprom accounts for around
March that reduced exports for almost a 90% of Hungary's gas imports under a 15-
month; safety inspections for World War II- Gazprom and Hungary agree year contract signed in October last year
era deep-sea mines in June; a Russian court that guarantees at least 4.5 bcm of annual
ruling in July to stop loading for 30 days on additional gas deliveries supply.
due to alleged violations of the pipeline's oil
spill plan, which was overturned a few days for winter
later and replaced with a minor fine; and
most recently, subsea cracks discovered on Hungary and Russia’s gas giant Gazprom
buoyancy tanks that could limit loading on have signed an agreement that will

Week 36 09•September•2022 www. NEWSBASE .com P17