Page 94 - RusRPTJun20
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9.1.1b Oil and gas sector news
Gas production at one of Russia's largest fields, Chayandinsky, may not be enough to fill the Power of Siberia gas pipeline and Gazprom will fail to meet its delivery commitments to China as a result, lenta.ru reported on May 28. Russia’s 30-year gas supply contract with China is on the line. Gazprom risks losing more than RUB1.5 trillion if it can’t deliver up to 35bcm a year. The report blames a rushed geological exploration, systematic negligence and criminal forgery committed by company leaders during the projects set up as well as regular disregard for technological violations and even the consequences of import substitution.
Russia remained the world’s second largest oil producer after the US in March, with the output falling by 36,000 barrels per day, or by 0.3%, on the month to 10.575mn barrels per day, the Joint Organizations Data Initiative (JODI) said in a report on Monday. The US produced 12.926mn barrels daily in March, up 0.7%. Saudi Arabia occupied the third place with a daily output declining 0.5% to 9.733mn barrels.
Russia may advocate for tougher quotas at the next OPEC+ meeting.
According to Kommersant, citing yesterday’s negotiations between Energy Minister Novak and oil producers, Russia may recommend a prolongation of current quotas for another two months. If OPEC+ supports the proposal, the crude production cut may amount to 9.7mbd vs currently guided 8mbd in July-August.
Russian domestic gas consumption declined 10% y/y in 1Q20 (or by 9.5bcm) in the first quarter of this year y/y, according to the Ministry of Energy, Interfax reported on May 25. Demand for gas for electricity generation and heating fell 11% y/y and 13% y/y, respectively, while the population cut consumption 9% y/y. Although the reduction in domestic gas demand does not come as a surprise, given the warm winter and COVID-19-related limitations, analysts believe the risks will be disproportionally spread between domestic gas suppliers (as has historically been the case). This is somewhat confirmed by Gazprom’s guidance of a 9% y/y fall in its domestic gas sales in 1Q20. Novatek’s domestic gas sales, though, were down 3% y/y in 1Q20, the company reported at the end of April. Gazprom previously guided for its FY20 gas sales in Russia to be down 5% y/y.
A gas glut forced Russia’s Gazprom to stop shipping gas across Poland on May 26 on the Yamal-Europe pipeline, Bloomberg reports in a story headlined: “Russian Gas Flows to Europe Plunge After Prices Collapse.” Prices dropped to $41/1,000 cubic meters, near the transit costs for Gazprom from its Yamal fields. Qatar says it has no plans to cut its LNG shipments to Europe. Under the ‘ship or pay’ clause in the new Gazprom contract with Ukraine, Gazprom has to pay for contracted pipeline volumes, whether they use them or not.
Gazprom has significantly reduced gas transit volumes through the Yamal-Europe pipeline following the expiry of the long-term transit
94 RUSSIA Country Report June 2020 www.intellinews.com
