Page 19 - GLNG Week 41

GLNG EUROPE GLNG

European gas prices recover

to level at end-2019

PERFORMANCE EUROPEAN gas prices have seen a significant than the seasonal average but within historical
recovery, with spot contracts at the Dutch TTF bounds.”
hub now selling at $186 per 1,000 cubic metres, Russia’s Gazprom naturally stands to gain
Kommersant reported on October 12. from higher prices over the coming months.
This marks the highest level since December But “the rebound in gas prices might lead to a
2019, just before prices plummeted after Russia recovery in LNG imports, which in turn would
and Ukraine agreed a new transit deal, averting likely keep gas prices from appreciating further,”
Russia’s Gazprom a potential supply disruption to Europe. Prices VTBC said.
blames US LNG slumped to an historic low of $34 per 1,000 cubic Gazprom has been hit harder by the slump
exporters for metres on May 21, as a result of coronavirus in European demand than most other suppli-
unbalancing the (COVID-19) lockdowns and a growing supply ers, with its pipeline sales to the continent con-
market. glut. tracting by 9% so far this year, the International
November gas futures are trading even higher Energy Agency (IEA) estimated in a webinar on
than the spot price, at $187 per 1,000 cubic October 12.
metres, according to Kommersant. The company expects the European mar-
“The growth in gas prices in Europe was ket to remain overstocked into next year, due
made possible by flattish LNG supplies to the to rebounding US LNG supplies, Gazprom
region, which have fallen a marginal 1% in Sep- Export CEO Elena Burmistrova said at the
tember-October to date versus August, but in online Flame conference. She blamed US
general have been declining in recent months, LNG exporters for unbalancing the market,
dropping 10% versus the summer,” VTB Capital saying that Gazprom had acted “responsibly
(VTBC) commented in a research note. “Natu- and self-confidently” by taking a hit to its sales
ral gas storage is now 96% full, which is higher rather than flooding the market.™

Russia’s Novatek ups gas

output 4.5% in third quarter

PERFORMANCE RUSSIAN natural gas major Novatek reported extremely low prices available on the European
a 4.5% year-on-year increase in gas output in and Asian spot markets in 3Q20,” BCS GM ana-
3Q20, and overall hydrocarbon production lysts argue.
growth of 3.6% y/y. In Russia, gas sales increased by 5.1% y/y
The company’s direct natural gas sales following the rise in core production, a posi-
declined by 0.8% y/y, owing to the LNG sales tive sign reflecting the company’s tapping of
from is Yamal LNG project going mainly to deeper, tighter horizons in West Siberia in core
long-term contract sales, reducing the amount operations and in joint venture projects such as
of LNG available for spot sales by the joint ven- SeverEnergia and Nortgas.
ture partners, BCS Global Markets commented More support for domestic sales also likely
on October 13. came from the ramp-up of output at its wholly
Novatek is securing the financing for Arctic owned North Russkoye project, BCS GM noted.
LNG-2, its second liquefaction project to launch However, BCS GM added that domestic gas
production. Its first, Yamal LNG, went on stream sales are the lowest margin (albeit significant)
in December 2017 and is now producing 17mn business that Novatek has, and the small “fall in
tonnes per year (tpy) of super-cooled gas. liquids sales could offset much of the financial
Despite the slight decline in sales in the third gains from the increased gas sales”.
quarter, BCS GM believes that on a net basis, For the second quarter of 2020 under IFRS
long-term sales are likely a gain for the com- Novatek showed $2bn in total revenues, $0.99bn
pany, as the long-term gas contracts have oil total Ebitda (including joint ventures such as
price links. Yamal LNG) and net income of $0.58bn. The
This, in turn, “almost certainly gave higher company beat consensus expectations on its top
margins than would have been realised via the and bottom lines by 2% and 7% respectively.™

Week 41 16•October•2020 www. NEWSBASE .com P19