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Russia increased its gas shipments across Ukraine by 3% in 2019, to almost 90bn cubic meters, according to Ukrtransgaz. With Russia using Ukraine’s pipelines to ship 45% of its gas to Europe in 2019, Russia sent 89.6bcm to the EU and Moldova. Under the new gas transit contract, Gazprom commits to shipping a minimum of 65bcm this year. Taking into account the delay in completing Nord Stream 2 and next week’s inauguration of TurkStream, Naftogaz estimates it will handle 75bcm of Russian gas shipments this year. In 2018, Ukraine shipped 86.8bcm, 7% less than in 2017.
Gazprom no longer makes enough money exporting gas to subsidize domestic Russian prices, Viktor Yatsenko, deputy head of the state monopoly company’s pricing department, told the Russian Gas forum last week in Moscow. Referring to the drop in European prices, he said: “The pillow is gone.” European gas prices are current at multi-year lows.
Members of OPEC+, an alliance of 24 countries that produce half of the world’s oil output, agreed to additional production cuts in Vienna on December 5. Effective January 1, the countries will cut oil production by another 500,000 barrels per day (bpd) from the October 2018 benchmark.
Overall, the parties agreed to cut production by roughly 1.7 million barrels in 1Q2020. In addition, Saudi Arabia committed unilaterally to reduce its own production by about 0.4 million barrels a day. As in its previous agreements, Russia committed to cuts of about 0.3 million barrels a day. The required cuts are, however, smaller than earlier, as gas condensate production will no longer be included in Russia’s production quota. Energy minister Alexander Novak noted that under the new calculation method, which excludes gas condensates, Russia would have more than exceeded its reduction targets in November 2019, even if it only achieved 85 % of its agreed cuts under the old system.
One reason for Russia’s non-compliance is pushback from its oil companies. Rosneft has been the most vocal opponent to the OPEC+ deal. Kommersant reports that prior to the agreement on Friday, Russian oil majors expected to gradually withdraw from OPEC+ as they commission new oil fields. In exchange for new cuts, Rosneft has demanded compensation from the government in the form of benefits for its Priobskoye field.
The new production cuts are temporary. They will extend through March 2020, at which point OPEC+ will reconvene to determine the future of its cooperation.
Bulgaria has started receiving Russian gas through TurkStream,
bypassing the traditionally Ukraine-Romania route, according to Vladimir Malinov, director-general of Bulgartransgaz, the state-owned gas transmission company. Bulgaria is to receive 2.9bcm year on the pipeline for domestic needs and more for on passing to Northern Macedonia and Greece. Malinov estimates the company will save $45mn a year on lower transit fees and gas prices. Next Wednesday, Presidents Erdogan and Putin are to formally inaugurate the €11.4bn, 930 km pipeline.
9.1.2 Automotive sector news
The sales of new cars and light commercial vehicles (LCVs) in Russia in 2019 declined by 2.3% to 1.76mn, according to the January 14 report by the Association of European Businesses (AEB) overseeing the industry. In December alone, however, the sales rose 2.3% year on year to 0.179mn units.
As reported by bne IntelliNews, the Russian car market declined in 2019,
77 RUSSIA Country Report February 2020 www.intellinews.com
