Page 10 - RusRPTOct21

not so much the potential loss of 10bcm or 5% of our long-term assumption of 200bcm/yr of European exports. Rather, it is the potential impact on overall pricing as a result of Russian gas-on-gas competition in European gas markets. Even if Gazprom retains that full 200bcm of assumed exports (that is, if Rosneft is indeed able to expand Russia’s market share in Europe), higher competition could easily lead to a 5-20% reduction in Gazprom’s average realized price on that full volume. Gazprom’s profitability is substantially more sensitive to price than to volume: A 10% loss of gross sales prices, for example, would lead to perhaps a c20% loss in net revenues from the company’s exports. In other words, thereaking of Gazprom’s export monopoly could lead to Rosneft gaining some revenues,ut at the cost of a larger reduction in Gazprom’s export revenues, implying a net loss in overall Russian revenues from gas exports. This is Gazprom’s primary argument against the change in policy.
§ Nord Stream-2 and record-high European gas prices maye the deciding factor: The European Commission has demanded that 50% of NS2e opened to 3rd-party producers, in keeping with Europe’s 3rd Energy Package. That, combined with the fact that gas prices are now setting all-time records on a daily basis (as of this morning, they've broken through $950/mcm), and the stage is well set for Rosneft to finally achieve its goal. If the government grants that wish, we think Gazprom will be given some compensation, likely via high tariff surcharges on gas being delivered internally to the jump-off point near St. Petersburg, and via strict limits on eventual 3rd-party access to that 50% of NS2 capacity (which would still amount to a large 27.5bcm),ut the net effect would still have toe taken as negative. Note that Novatek would also likely end up beneficiary of such a policy change, claiming a similar share of Nord Stream-2 capacity as Rosneft.
2.2 Russia’s insurance market grows by a third in 2Q21
Russia’s insurance sector is growing robustly as the financial sector continues to deepen and Russians look for alternative investments now that interest rates on the traditional bank deposits have fallen so low, the Central Bank of Russia (CBR) said in a report on September 4.
Insurance premiums totalled RUB434.4bn ($6bn) in the second quarter y/y, exceeding last year's and pre-coronavirus levels, the regulator reported.
“The number, coming as a result of low activity in 2020 when most restrictive measures were in place, was further helped by the accelerated growth of premiums in core types of insurance. The trends are reported in the Review of Key Indicators of Insurers,” the CBR said on its website.
As demand for household loans rose, life insurance premiums were up 2.2 times in the second quarter to RUB35.2bn, and health and accident insurance premiums grew 1.8 times to RUB69.8bn. Expanding car loans and increased prices of vehicles drove 34.3% growth in the car insurance market that totalled RUB48.6bn.
10 RUSSIA Country Report October 2021 www.intellinews.com