Page 116 - RusRPTNov21

cooler-than-typical weather so far in the month, boosting heating requirements even as injections into Russian storage continue. At these levels of output, Gazprom is producing 93% of its peak capacity of 1.5bcm/d as guided by management on a recent call. We think that peaking capacity is not sustainable on a full-year basis, and thus it is debatable whether Gazprom will have the capacity to provide extra gas for Europe’s spot markets even when domestic storage injections are completed in the coming days.
European storage refill season is over – Weather to determine gas prices. Although Europe is seeing slightly warmer-than-typical temperatures this week, storage injections have largely ceased, with net withdrawals happening 4 of the last 5 days. Given the shortages on the European gas and global LNG markets, Europe’s gas prices are going to be much more sensitive than typical to the weather in the coming weeks and months. Even modestly warm and windy weather could lead to a noticeable retreat in gas prices from current levels of >$1,100/mcm ($31/mcf), while cool and calm weather could cause sharp price spikes. In no event do we expect gas prices to be anything other than ‘very high’ until warm weather arrives in the spring.
President Vladimir Putin held a meeting on the energy crisis in Europe on October 6 and said Russia may be able to increase gas exports to EU.
· Putin said that in 2021, Gazprom might supply a record amount of gas to Europe. According to him, the energy crisis could be the consequence of the move away from long-term agreements.
· Putin asked the Ministry of Energy to ensure that the transit agreement with Ukraine was implemented and that Gazprom shipped at least the contracted amount through the country (although increasing the amount above that would be unprofitable for Gazprom, due to higher costs).
· Deputy Prime Minister Alexander Novak said that soaring gas prices in Europe did not reflect the current fundamental situation, so there was a speculative component to the growth. He suggested that the launch of Nord Stream-2, and additional on exchange sales of natural gas on the St Petersburg exchange, might help to bring down European prices.
· Rosneft CEO Igor Sechin said that allowing Rosneft to export gas (as a pilot project) could help to stabilise the European gas market. He also said it would be favourble for Russian utilities to contract supplies of fuel oil in advance.
The second day of Russian Energy Week. The key takeaways from it are as follows.
● Minister of Energy Nikolai Shulginov noted that the ministry supported extending the modernisation programme after 2031 with a focus on cogeneration and CCGT to allow for decarbonisation and to improve efficiency.
116 RUSSIA Country Report November 2021 www.intellinews.com