- In January, Gazprom produced 47.4 bcm of gas, up 1% YoY, according to the company’s statement on Telegram. This means that the average daily gas output was 1,529 mn cu m/d, up 16 mn cu m/d on the same period of last year. We note, however, that the daily average output is down from 1,540 mn cu m/d in mid-January to estimated 1,518 mn cu m/d in the second half of January.
- In our estimate the Chayanda field which feeds the Power of Siberia pipeline was the main source of additional output (up 17 mn cu m/d to 48 mn cu m/d). Outside East Siberia the gas production was only marginally lower (down 1.4mn cu m/d to 1,480 mn cu m/d). This might be close to Gazprom production capacity which is around 1,500 mn cu m/d.
- Gazprom deliveries to domestic consumers in January were up 3.2% YoY to 35.4 bcm (1,144 mn cu m/d). The pace of growth in domestic demand continues to slow down YoY. We expect Gazprom deliveries to Russian customers to flatten out YoY in the remainder of winter,
- In January Gazprom export to Europe, Turkey and China fell 41% YoY to 11.4 bcm (368 mn cu m/d). Gas export was also down 16% MoM (compared to December last year).
- There are signs that gas export to Europe might start to recover in the coming months. Gazprom doubled transit via Ukraine on February 1. We also believe that Gazprom would need to restore gas export to Europe to meet export target for this year.
- Our modelling of Gazprom gas balance in January indicates that the company reduced withdrawal from Russian and European gas storage by 6.5 bcm (210 mn cu m/d) YoY, to offset for a reduction in export to Europe and Turkey (down 8.4 bcm or 273 mn cu m/d YoY).
- This means that Gazprom gas storage was around 52 bcm as of end January, up 14 bcm YoY and 15% above 3-year average. At the end of the heating season in Russia (end March), Gazprom gas storage might be as high as 38 bcm, up 23 bcm YoY. The surplus storage could be used to supply additional volumes to Europe in the coming months, in our view.
- In the first 15 days of January, Gazprom produced 23.1 bcm of gas, up 2.1% YoY. This means that the average daily gas output was 1,540 mn cu m/d, up 32 mn cu m/d on the same period of last year.
- The main contribution to extra output (est.19 mn cu m/d) might have come from the Chayanda field in East Siberia, which feeds the Power of Siberia pipeline to China. Gas export to China was up 50% YoY to estimated 44 mn cu m/d, based on numbers released by Gazprom.
- Gazprom deliveries to domestic consumers in the first 15 days of January were up 3.7% YoY to 16.8 bcm (1,121 mn cu m/d). The weather in Russia has been mixed in January with both cold and mild spells. This pattern might last for the rest of the winter.
- Over the first half of January Gazprom export to Europe, Turkey and China fell 41% YoY to 5.4 bcm (360 mn cu m/d). Gas export was also down 17.9% MoM (compared to December last year). We estimate that gas export to Europe only (excluding China and Turkey) was down 55% YoY to 227 mn cu m/d.
- Our model of Gazprom gas balance for January indicates that the company might have reduced Russian gas storage withdrawal by est. 195 mn cu m/d to offset for a reduction in export (down est. 248 mn cu m/d). This could mean that Gazprom gas storage will be at 52 bcm as of end January, up 14 bcm YoY. At the end of the heating season in Russia (end March), Gazprom gas storage might be as high as 38 bcm, up 23 bcm YoY.
- Gazprom Group gas production was up 62 billion cubic meters (bcm) to 514.8 bcm in 2021. These additional volumes have mostly stayed in Russia.
- Gazprom sales to domestic customers went up 31.9 bcm YoY to 257 bcm. Export to Europe, Turkey and China was up 5.8 bcm YoY to 185 bcm. Injection into Russian gas storage was up an estimated 28 bcm YoY to 61 bcm in 2021. Russian gas storage was 83% full as of 29 December, at 60.2 bcm.
- In December, Gazprom production might have been close to capacity (47.2 bcm or 1,523 mn cubic meters per day). As in previous three months, the company was sending more gas to domestic consumers and much less gas to export markets compared to last year.
- There was a significant YoY drop in gas export to Europe (including Turkey) in December (down 5.7 bcm or 185 mn cu m/d). This was offset a reduction in Russian storage withdrawal of 6.9 bcm (225 mn cu m/d) vs last year.
- Over the next three months we assume that Gazprom output will remain at seasonally high level, domestic demand will be at around three-year average and export will remain tagged to long-term contracts. This would mean that Russian gas storage level might be 34 bcm full at the end of March this year, up 19 bcm compared to 2021.
- These volumes could be used for additional export, or, in its absence, it could lead to a drop in Gazprom output and sales in 2022.
- See the report for charts and analysis.
- 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.
- 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.
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