Page 140 - RusRPTOct20

9.2 ​Major corporate news 9.2.1​ Oil & gas corporate news
● Gazprom
Gazprom​’s exports to Europe, in volumes and in price, are improving from a low base​, and the supply/demand balance in Europe has definitely improved this summer as LNG – particularly from the US – retreated from the market. However, note the futures markets have long forecasted an increase in gas prices in Europe with the seasonal increase in demand this fall, so the improvements in August were a few weeks earlier than anticipated. While Gazprom’s export price will be higher than the August spot price, we do not think it will be very far above the company’s accounting breakeven level of $100/mcm (in 2Q20 Gazprom’s average European export price was c$110/mcm). Meanwhile, US LNG production, which was c2/3 shut down this summer due to the lack of attractive pricing in Asia and Europe, is in restart mode after Hurricane Laura. We expect a re-ramp of US liquefaction to near full capacity by October, with much of the extra 5bcm/month of gas likely ending up on European markets either directly or indirectly, capping price increases and taking market share from Gazprom and other suppliers of pipeline gas.
Gazprom​'s gas deliveries to China via the Power of Siberia pipeline rose from 8.6 mmcmpd in 1H20 to 11.8 mmcmpd in July-August, ​Argus FSU Energy reported yesterday. Our view: The company's management previously stated that the contracted supply volume via Power of Siberia to China was set at 5 bcm this year, with 80% of this volume (4 bcm) representing the take-or-pay minimum. The company delivered 1.57 bcm in 1H20, or just 31% of the total contract volume and 39% of the take-or-pay minimum. The reported gas delivery volumes in July-August imply a 36% increase in daily deliveries from 1H20, on our calculation. If these daily volumes remain in place until the end of this year Gazprom's total gas deliveries to China via Power of Siberia could reach 3.8 bcm this year, or close to the minimum take-or-pay obligation. We expected a considerable increase in the Chinese gas offtake via Power of Siberia in 2H20 and particularly in 4Q20. Due to the gas price link to the oil product basket price based on the nine-month average, prices for gas from Power of Siberia should decline in 3Q20 and in 4Q20. In 1Q20 and in 2Q20, the prices for Russian gas via Power of Siberia were around $200/mcm and $180/mcm, respectively, according to Chinese customs data. These were among the highest prices in Gazprom's export portfolio. We expect that an increase in gas volume supply to China in 2H20 would allow Gazprom to deliver close to its contractual obligations (5 bcm) this year.
Gazprom​'s management is discussing a capex reduction, ​Interfax​ reports.
140 ​RUSSIA Country Report​ October 2020 ​ ​www.intellinews.com