Page 13 - FSUOGM Week 15

FSUOGM PERFORMANCE FSUOGM
Novatek overseas sales slump in Q1
RUSSIA
More of Novatek’s gas was sold under long- term contracts this year rather than on the spot market.
RUSSIA’S biggest independent gas producer Novatek saw a sharp dip in international sales in the first quarter, the company reported on April 9.
The vast bulk of Novatek’s overseas gas sales come from the Yamal LNG project in the Russian Arctic, where the firm is partnered with France’s Total and China’s CNPC and Silk Road Fund. Its international gas shipments slumped 28.4% year on year in the three months ending March 31, to 2.45bn cubic metres.
Novatek attributed the decline to the fact that more of Yamal LNG’s gas was sold under long-term supply contracts during the period versus a year earlier, at the expense of spot mar- ket sales.
Yamal LNG came on stream in late 2017 and it reached its full 16.5mn tonne per year (tpy) capacity within a year, ahead of schedule. The faster ramp-up at the plant meant that more gas was sold on a spot basis initially, as long-term
contracts had yet to kick in. Most of its gas is con- tracted for delivery to China and other Asia-Pa- cific markets.
China has declared forces majeure on a num- ber of its gas import contracts this year, citing the impact of the coronavirus COVID-19 pan- demic. But neither Novatek nor its Chinese part- ners have confirmed a disruption in Yamal LNG shipments.
Novatek’s domestic gas sales totalled 18.24 bcm in 2019, representing a 2.9% drop y/y. This brought overall sales to 20.7 bcm, down 6.8% compared with 2018.
Despite weaker sales, Novatek’s gas produc- tion grew by 2.2% y/y to 19.1 bcm in the quarter. Its liquids output was up 2% at 3.05mn tonnes. The company had 0.3 bcm of gas and 620,00 tonnes of gas condensate and petroleum prod- ucts either in storage or transit at the end of March, it said, recognising these volumes as its inventory.™
POLICY
Azerbaijan agrees 164,000 bpd cut to oil output
AZERBAIJAN
Azerbaijan is unlikely to target cuts at the ACG fields.
AZERBAIJAN has pledged to scale back its oil supply by 164,000 barrels per day (bpd) dur- ing May and June, as part of OPEC+’s tentative agreement on output cuts.
Azeri production is expected to average 554,000 bpd in the two-month period as a result of the cuts, its energy ministry told the Russian press on April 10. The baseline for the reduction is Azerbaijan’s output in October 2018, which amounted to 718,000 bpd.
The OPEC+ suppliers’ alliance, consisting of OPEC’s 13 members and Russia, Mexico, Kazakhstan, Oman, Azerbaijan, Malaysia, Bahrain, Sudan, South Sudan and Brunei, agreed in emergency talks on April 9 to lower their combined output by 10mn bpd in May- June to help rebalance the market. Global oil demand is forecast to plummet by as much as 22mn bpd this month because of the impact of coronavirus (COVID-19) lockdowns on fuel consumption.
The deal is yet to be finalised, as Mexico has complained that its share of the cuts, 400,000 bpd, is too great. Instead it has reportedly
proposed a much smaller reduction of 100,000 bpd. Russia and OPEC’s de-facto leader Saudi Arabia aimed to put pressure on Mexico to join the accord at a meeting of G20 energy minis- ters on April 10, but no breakthrough has been announced.
Azerbaijan produces 763,900 bpd in March, according to its energy ministry, up 2% month on month. The volume included 683,700 bpd of oil and 80,200 bpd of condensate.
Around three-quarters of Azerbaijan’s oil comes from the Azeri-Chirag-Gunashli (ACG) oil project in the Caspian Sea, operated by an international consortium led by BP. Baku would violate the terms of the production-sharing agreement (PSA) governing ACG if it forced the project’s investors to cut supply. Furthermore, largely thanks to economies of scale, ACG pro- vides Azerbaijan’s lowest-cost oil.
If the OPEC+ deal is finalised, it is therefore likely that Azerbaijan will instead make cuts at older, higher-cost fields operated solely by its national oil company (NOC) SOCAR, in order to meet its quota. ™
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