Page 95 - RusRPTJun20

contract with Poland ​on 17 May, ​Kommersant​ reported on May 25. Gas flow at the pipeline entry point was only 18% of pipeline capacity (or 17.3mmcm/d) on 24 May and likely fell to just 10% yesterday. Polish gas transmission system operator Gaz System is to conduct a capacity booking auction for October 2020- September 2021 on 6 July. Meanwhile, Gazprom is to purchase pipeline capacity at daily auctions until 1 July, while it has already booked 80% pipeline capacity for the third quarter, the paper writes.
Oil demand remains at a low level but the demand in May increased by 20% against April​, Russian Energy Minister Alexander Novak said on Monday, as reported by TASS. The oil surplus is about 7-12 mln barrels per day so far but the Energy Ministry expects market rebalancing owing to demand growth in June – July, Novak added.
The demand for oilfield services plummeted 50% and the government has prepared support measures for the sector. ​“We have prepared a range of proposals related to support of [oilfield service] companies, with the demand for their services down by 50% approximately. [The demand] should be brought to at least 80% of the level, as it was last year,” the source noted.
Oil prices may exceed $30 per barrel in the summer due to a recovery in demand​, but sharp growth should not be expected, Head of Gazprom Neft Alexander Dyukov said in an interview with Channel One. "The market believed in the seriousness of intentions of the parties to the OPEC deal. Indeed, we can say that the deal has already begun working towards decline. But at the same time, of course, we should not expect a sharp increase in oil prices in May. I hope that this summer, with restoration of oil demand, prices will surpass $30 per barrel, and by the end of the year they will approach $40 per barrel," he said. Dyukov added that the deal to reduce production will give Russia advantages in the form of reserve capacities, which will strengthen the country's position in the negotiations in the future.
Gazprom​ has started the assessment of the Power of Siberia 2 pipeline ​to China through Mongolia, Kommersant reports. All pre-investment studies are scheduled to be concluded this year. The capacity of the new pipeline might reach 50bcm/a. The gas for the pipeline could be supplied from the Yamal and Nadym-PurTaz regions in YaNAO, as well as the Kovykta field and fields in the Krasnoyarsk Region. Our View: Gazprom has a 30-year take-or-pay contract with CNPC for the delivery of natural gas through the existing Power of Siberia pipeline, with long-term annual deliveries of 38bcm/a and up to 5bcm planned for delivery in 2020. Previously, Gazprom has said that it hopes the start of gas deliveries through Power of Siberia in 2019 would incentivise China to accelerate negotiations on Power of Siberia 2. The fact that the route through Mongolia was chosen for assessment might mean that the company has chosen to abandon the Altay project, under, which the second export pipeline to China could be built in the Altay region. We believe that the new proposed route might be more convenient for China, given that it is to arrive in the eastern part of the country (the key gas consumption region), rather than the western part (which is sparsely populated and under-industrialised). This route is also shorter and would run across more convenient flat land, so would likely cost less to construct. We calculate that the total capex for the pipeline might exceed $20bn, assuming a total length of 4,800km (back in 2010, Gazprom estimated the capex of the gas pipeline via Altai at $14bn). That creates a downside capex risk to our forecast in the longer term. The proposed route poses some transit risks to both Gazprom and China. We also believe that
95​ RUSSIA Country Report​ June 2020 ​ ​www.intellinews.com