Page 44 - Russia OUTLOOK 2022

As bne IntelliNews reporting in detail the high prices were the result of a perfect storm of coincidences caused by the V-shaped market of the preceding two years lead to a shortage of supply in Russia as well as in Europe.
As Europe started the heating season in October with 20%age points less gas in storage than usual and the winter started out as a particularly cold one it remains to be seen if Europe will run out of gas. It will be a close-run thing, but at the time of writing it appears that there is just enough in storage to get through the season, which usually ends at the end of March.
The Nord Stream 2 issue is unlikely to be resolved until the summer at the earliest but more important for the Kremlin is to use the crisis to get the EU members to sign up for more long-term gas supply contracts as those commitments are needed to continue to develop the massive reserves in the Yamal fields in the Arctic.
At the same time Gazprom has made it clear that the future of Russia’s gas sector lies in Asia. Russia is already delivering gas from western Siberia to China via the newly built Power of Siberia pipeline and those volumes will grow. But the gas crisis will only serve as an impetus for a second pipeline in Russia that will connect the Yamal fields to the Power of Siberia. Currently the Yamal fields are solely tasked with providing gas to Europe via the Northern corridor pipelines (and Yamal is not connected to the central corridor that feeds the Ukrainian pipelines) and sending gas to Asia from Yamal is not possible.
Gazprom had a stonkingly good year thanks to the gas crisis. It was criticised for not taking advantage of the soaring gas prices which passed the $2,000 per thousand cubic metres in December – its highest level ever – and is expected to end 2021 with financials at record levels: EBITDA of some RUB3.5tn ($48bn), net income in excess of RUB2tn ($27bn) and FCF of more than RUB1tn ($14bn).
The company will take advantage of this windfall to continue its never-ending building campaign: in 2021 capex will be RUB1.9tn, or some $25bn (excl. VAT). The company has already started to implement the 2022 investment programme.
At the same time it paid down debt so that by the end of 2021 net debt to EBITDA is to be below 1x, Gazprom’s Deputy Chairman of the Management Committee Famil Sadygov said in an interview at the end of 2021.
44 RUSSIA Russia OUTLOOK 2022 www.intellinews.com