Page 7 - FSUOGM Week 01 2020
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FSUOGM COMMENTARY FSUOGM
2020 Outlook
The consensus is that Russian oil output will fall in 2020 or at least remain close to the same level as last year, as OPEC+ parties agreed in Decem- ber to deepen production cuts.
Saudi Arabian Energy Minister Prince Abdu- laziz bin Salman has urged those lagging behind their commitments to carry their share of the burden. The kingdom is making the deepest cuts in the group.
Russia has agreed to shave a further 70,000 bpd from its output in the first quarter of this year, bringing its total reduction quota to around 300,000 bpd. But its baseline and monthly pro- duction calculations exclude the extraction of condensate, often produced at gas fields, making it easier to hit its target.
Energy Minister Alexander Novak has denied that the change is a loophole allow- ing Russia to pump more oil and still claim compliance. While Russia’s official statistics do not yet provide a breakdown for crude and condensate, the ministry will regu- larly inform analysts, the media and OPEC
about its output’s composition, according to Novak.
Condensate production often rises and falls in line with gas production. And Russia also achieved a post-Soviet record amount of gas last year of 737.6bn cubic metres, according to CDU-TEK, up 1.7% y/y. Russian producers Gaz- prom and Novatek both reported output gains, while Rosneft, Lukoil and Surgutneftegaz all saw declines.
Russia has also said it will bring up the issue of exiting the cuts agreement at the next OPEC ministerial meeting in March.
“Oil production cuts can’t be eternal,” Novak said last month, adding that Russia needed to defend its global market share and let its oil com- panies develop new projects. “We will gradually need to make a decision on exiting” the accord, he said.
Many of Russia’s leading oil producers, with state-owned Rosneft the most prominent amongst them, have been lobbying the govern- ment to end the production cut deal, but so far Moscow has held firm.
PIPELINES & TRANSPORT
TurkStream comes online and starts Bulgarian supplies
BULGARIA
The pipeline’s formal launch is scheduled for January 8.
SEVERAL countries in the Western Balkans and Southeast Europe began receiving Russian gas via the TurkStream pipeline, which came online on January 1, Bulgaria’s state gas company Bul- gargaz said in a statement.
Bulgaria is receiving the supplies from the pipeline that runs through Turkey instead of tak- ing deliveries from Gazprom via Romania and Ukraine as previously. Bulgartransgaz estimates that the switch will save it some $45mn per year.
The Russian and Bulgarian gas firms signed an agreement on the new arrangement on December 30.
Bulgaria receives the TurkStream supplies at the Strandzha-2 compressor station at its Turk- ish border. Previously it got gas from the Negru Voda station at its Romanian border.
“The financial gains from changing the receiving point are estimated to be approxi- mately BGN81mn ($45mn). Bulgargaz and cus- tomers in Bulgaria save by no longer having to pay for access to and transit through the territory of Romania worth an approximate BGN76mn,” the statement read.
North Macedonia and Greece also began receiving Russian gas through the Strandzha-2 new checkpoint , Bulgartransgaz executive director Vladimir Malinov said in
an interview with Bulgarian National Radio as cited by Tass.
“Gas from Russia is successfully supplied through a new entry point (gas compressor station) of Strandzha-2 via Turkey. The advan- tages of this project are security and economic viability. Both North Macedonia and Greece are receiving gas through Strandzha-2,” Malinov said.
Bulgaria will get 2.9bn cubic metres (bcm) of gas annually though the new gas compressor sta- tion of Strandzha-2. The country’s gas infrastruc- ture facilities were ready to pump that amount of gas.
Bulgartransgaz has promised a lower gas price in the next three months and said it was in talks with Gazprom to negotiate better prices.
TurkStream is a twin-branch pipeline run- ning from Russia to Turkey via the Black Sea. One branch is set to continue to southern and Southeast Europe.
Russia has been supplying gas to Bulgaria since 1974 and is currently the only major sup- plier in the Bulgarian market.
While TurkStream is already flowing, its formal launch will take place on January 8 when Russian President Vladimir Putin visits Istanbul.
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