Tag Archives: Gazprom

Russian gas export price up in Dec, but Jan 2022 likely to slide to sub $500/mcm

  • Based on the Russian customs data released on February 7, the weighted-average price of Russian-origin gas to all export destinations (exc. China was $517 per 1,000 cubic meters (mcm) in December 2021, compared to our forecast of $580/mcm.
  • Based on customs data, we estimate that the price for Russian gas in Europe only (excluding FSU, Turkey and ESP sales) was $711/mcm in December. This is at a 28% discount to the average price of TTF December futures of $1,005/mcm. While the majority of Russian contract prices is linked to TTF futures, some of the contracts might be based on long-term/fixed prices, which explains discounts to hub prices.
  • Our pricing model shows that the weighted average price of Russian-origin gas to all destinations (exc. China) in January 2022 declined 8% MoM to $475/mcm and export volumes fell 20.9% MoM to 12.7 bcm. The fall in price is on the back of higher proportion of sales to FSU and Turkey, where prices are below the European level. Russian customs will report the relevant data in early March.
Gas-price_Dec21_customs_7Feb22_FINALDownload
  • The Russian gas price to European customers is estimated at $749/mcm, at a 46% discount to the average price of January TTF futures ($1,392/mcm) and 25% discount to TTF average spot price for January 2022 ($1,005/mcm).
  • This means that some Gazprom customers in Europe were buying Russian gas at a deep discount to headline hub prices. At the same time, Russian gas contracts with prices linked to next-month futures (est. 21% of total export to Europe in January) would have been more expensive ($1,392/mcm) than spot volumes in January ($1,005/mcm).

In the first week of February, the average price of TTF next-day futures ($935/mcm) has been below Russian contract prices based on dated futures ($1,002-$1,375/mcm). At the same time, Russia gas export to Europe (exc. Turkey and Ukraine) was up 24% MoM to 312 mn cu m/d (1-5 February), up from 251 mn cu m/d on average in January.

Gazprom: positive signs for the European gas market

  • Russian gas export to Europe so far in January averaged 246 mn cu m/d, down 31% year-on-year (data as of January 26). However, there are indirect signs that Gazprom might be looking to increase supplies in the coming months.
  • According to Interfax[1], at a meeting with analysts Gazprom management pointed to high prices under long-term contracts as one of the reasons for a sharp drop in Russian gas supplies to Europe. Prices for around 50% of export deliveries are linked to month-ahead futures price. In December the average price for January deliveries was over $1,390 per 1,000 cubic meters. So far in January, the average next-day spot price was around $1,000 per mcm, according to our calculations.
  • Russian gas export to Europe could recover in February-Mach on more favourable pricing, according to the Interfax report.
  • Separately Gazprom might be placing Eurobond as soon as February if the geopolitical situation improves. This could reopen credit markets for Russian bond issuers, Interfax said[2].  Gazprom has just released an updated Eurobond prospectus. This usually indicates an approaching Eurobond placement. The company might want to raise money to refinance $1.3bn bond due on March 7. At the same time, Gazprom has a substantial cash pile to pay the debt if required.
  • A bond placement is usually accompanied by a roadshow and meetings between Gazprom top management and bondholders. This could be good news for the market if the company clarifies its strategy in Europe and provides more detail of production and export targets for the year.  Bond investors might want to hear confirmation that Gazprom might restore export flows to Europe to meet its operating and financial targets for the year. It would be also hard to expect a successful bond placement by Gazprom unless sanction and other risks are much reduced in the near future.
  • In another piece of news on January 26 Nord Stream-2 AG announced that it had set up a subsidiary to operate the 54-km section of the NS-2 pipeline which runs in the German territorial waters. The founding of a subsidiary was the requirement of the German Federal Network Agency. This might reopen certification of the NS-2 pipeline which was suspended in November 2021.
  • We believe that the announcement could be a sign that the NS-2 certification process is alive. We also note that opposition of the Ukrainian officials to the project appears to have shifted from a complete rejection of the pipeline on security grounds to more technical issues, such as a requirement to certify the entire pipeline rather than just the 54-km section in Germany. At the same time, it has been made clear to Russia that NS-2 pipeline would be mothballed if Russia makes a military move into Ukraine.
Gazprom_Europe_bond_28Jan22_FINALDownload

[1] Европа в январе полагается на запасы в ПХГ, СПГ и спот, переживая последствия шока декабрьских цен на газ, Ifax, 27 January 2022

[2] Газпром в феврале может выйти с новыми евробондами, если геополитика даст шанс – источник. Ifax, 28 January 2022

Russian gas storage still 83% full after a cold spell in December

  • Russian gas storage was 83% full at 60.2 billion cubic meters (bcm) as of 29 December. The storage has not been much dented by a cold spell in mid-December with14.2 bcm of gas withdrawals over the last couple of months. A late start of the withdrawal season and YoY decline in exports might explain why Russian gas storage is at its highest level over the last five years.
  • Unusually, Gazprom may have had relatively full gas storage in Russia (close to working capacity of 72.6 bcm) in early November, before the company started withdrawals. This could partially explain a relatively high gas storage volume as of end December, in the middle of the heating season.
  • As of December 29, Russian gas storage was 9 bcm fuller than at the end of last year. If the winter gas demand in Russia is close to the five-year average during the remainder of the heating season (January-March next year), Russian gas storage would stand at 34 bcm at the end March 2022. This would be 19 bcm above the level of the previous year.
  • The high level of Russian gas storage might also reflect a YoY fall in gas export in October-December. And If Gazprom export (to Europe, Turkey and China) remains at the current level of around 14-15 bcm per month, exports might drop to around 170 bcm in 2022, down 16 bcm YoY.
  • Fuller Russian gas storage and lower YoY exports could lead to a drop in Gazprom Group output in the coming year. We estimate that the company’s gas output could decline by as much as 35 bcm to 480 bcm in 2022. This could happen if Nord Stream-2 pipeline is not operational and export to Europe is limited to volumes under long-term contracts.

Please see below for more detail.

Russian_Gas_Storage_30Dec21_FINAL-3Download

Gazprom plans for 2022: what the numbers tell us
(report revised on 18 Jan 2022)

  • Gazprom management have disclosed the company’s targets and forecasts for 2022. Total gas exports (inc. Europe, Turkey, China and the FSU) are to rise 3.5 bcm to 227 bcm in 2022. The corresponding export price is expected to average $296 per 1,000 cu meters (per mcm). 
  • Based on these numbers we estimate that Gazprom export sales to Europe only might rise from estimated 157 bcm in 2021 to 160 bcm in 2022. This includes an increase in gas supplies to Ukraine (+8 bcm YoY), a sharp drop in volumes sold via Electronic Sales Platform (ESP) for deliveries in 2022 (- 3 bcm) and lower sales under the long-term contracts (-3 bcm YoY).
  • To meet export targets, Gazprom would need to utilise existing transit routes, including the Yamal – Europe pipeline, more fully in the coming months, even if the company is to ship additional export volumes via the Nord Stream-2 pipeline in the second half of 2022.
  • We assume that export to Turkey might decline slightly from est. 27 bcm to 24 bcm in 2022, on availability of alternative supplies. Sales to China via the Power of Siberia pipeline are forecast to increase 6 bcm to 15 bcm in 2022.
  • Gazprom management expects average export gas price (to Europe, Turkey and the FSU) to rise from ‘over $280/mcm’ in 2021 to $296/mcm next year. This means that Gazprom might be factoring in the same level of prices for long-term contracts and a 40%+ YoY increase in oil-linked prices.
  • Gazprom’s CEO Alexei Miller said that Gazprom Group production could reach 515 bcm in 2021, up 61 bcm YoY. Considering the company’s plans for domestic deliveries and exports in the next year, we estimate that Gazprom Group output will fall 3% YoY to 500 bcm in 2022.
Gazprom_plans_2022_22Dec21_FINAL-1Download

Gazprom in mid-December: output high, export low, storage full

  • In the first 15 days of December, Gazprom average daily gas output was 1,520 mn cu m/d, up 68 mn cu m/d on last year, based on data released by the company.
  • Gazprom deliveries to domestic consumers were running below last year levels at 1,045 mn cu m/d, reversing some gains in domestic demand seen in September-November.  
  • Gazprom export to Europe, Turkey and China fell 161 mn cu m/d YoY but increased 17 mn cu m/d MoM to 440 mn cu m/d.  Based on the current data, Gazprom annual exports (including China) might reach 185 bcm in 2021, up 3.3% YoY.

  • Our model of Gazprom gas balance for December indicates that the company might have an estimated 61 bcm of gas in Russian storage as of end 2021, up 10 bcm YoY. Our calculations show Gazprom might have some extra 20 bcm of gas in Russian storage at the end of winter season of 2021/2022.
  • Please see below for more detail.
Gazprom_mid-Dec-stats_15Dec21_FINALDownload

Russian-origin gas price to Europe in October and other stats

  • The weighted-average price of Russian-origin gas to Europe, Turkey and the Former Soviet Union (FSU) was $444/mcm in October. This is based on the Russian customs data, released on December 13.
  • Adjusted price to Europe only (excluding FSU, Turkey and ESP sales) was $556/mcm, according to our estimates. This is at a 31% discount to average price of TTF October futures.
  • In the first ten months of the year, the total volume of Russian-origin gas sold to Europe, Turkey and China was 144 bcm (473 mn cu m/d) , up 8.5% YoY. However, in October, export volumes fell 27% YoY to 11.8 bcm (381 mn cu m/d) in our estimates. Shipments of Russian-origin gas to Germany, Netherlands and Austria dropped sharply YoY. This may be partially explained by high demand from domestic consumers and, unusually, net injections into Russian storage in October.
  • Total gas exports by Gazprom to Europe, Turkey and China rose 10.9% YoY to 158.8 bcm (521 mn cu m/d) in the first 10 months of the year, according to Gazprom. Additional 15.7 bcm of gas sold by Gazprom was mostly of Russian origin (up 10 bcm YoY) with an increase in net sales from European gas storage and a small YoY decline in sales volumes of Central Asian gas, in our estimates.
  • Based on our pricing model, the weighted average price of Russian-origin gas to Europe, Turkey and the Former Soviet Union in November was $511/mcm. The Russian gas price to Europe only (excluding FSU, Turkey and ESP sales) is estimated at $660/mcm, at a 40% discount to the closing price of November TTF futures.

Please see the full update below.

Russian-gas-price_customs_13Dec21_FINALDownload

Gazprom in November: output near capacity, export to Europe stabilises MoM

  • Monthly operating data was promptly released by Gazprom on December 1. The company’s output was 1,500 mn cu m/d in November, up 77 mn cu m/d on last year.
  • Gazprom deliveries to Russian customers were up 49 mn cu/d, while exports fell 143 mn cu m/d, in our estimates. This would suggest that net Russian storage withdrawal was much lower than last year.
  • At the current production rate, the company could potentially increase supplies to Europe in December, even if the first winter month in Russia is as unusually cold as last year.
  • Please see below for more detail.
Gazprom_Nov21-stats_2Dec21_FINALDownload

Gazprom: plan B for winter

  • Gazprom management held a conference call on the company’s financial results of 3Q21 on November 29. The Q&A session was mostly focused on the company’s plans for the rest of this year and into the next one.
  • Our key take-away is that the company’s management did not reaffirm export target for this year and seems to be working on the assumption of high gas prices in Europe in the coming months. This would suggest that Gazprom might be reluctant to increase gas supplies to Europe until the Nord Stream-2 pipeline (NS2) is approved.
  • As discussed in our November Russian gas report, we see some availability of Russian gas for additional exports in December. We also believe that the prospect of successful certification of NS2 may have improved if Gazprom were to fully utilise available transit capacity for gas exports to Europe in the coming months.
  • In our view, the approval of NS2 might drag on well into the next year. This means that the NS-2 capacity might not be operational in 2022. This corresponds to our pessimistic scenario for Russian gas supplies to Europe in 2022. However, we still forecast Gazprom to export to Europe (inc. Turkey) to increase 4 bcm to 174 bcm in 2022.
  • Below are brief comments on these and other points of interest.
Gazprom_Plan_B_for-winter_1Dec21_FINAL-1Download