Tag Archives: Russian gas export

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-origin gas price to all export markets at $503 in November, export to Europe drops by 29% YoY

  • The weighted-average price of Russian-origin gas to Europe, Turkey and the Former Soviet Union (FSU) was $503 per 1,000 cubic meters (mcm) in November, compared to our forecast of $511/mcm. This is based on the Russian customs data, released on January 14. It does not include sales to China.
  • Russian customs report the total value of Russian-origin gas shipped across the border. We work out average prices paid for Russian gas by customers in the FSU, Europe and Turkey. 
  • We estimate that Russian gas price to Europe only (excluding FSU, Turkey and ESP sales) was $668/mcm in November. This is at a 39% discount to the average price of TTF November futures of $1,112/mcm.
  • Based on our pricing model, the weighted average price of Russian-origin gas to all destinations (Europe, Turkey and the Former Soviet Union) in December was $580/mcm. The Russian gas price to Europe only (excluding FSU, Turkey and ESP sales) is estimated at $855/mcm, at a 14% discount to the average price of December TTF futures ($1,001/mcm) and 38% discount to TTF average spot price for December. 
  • We estimate that Russian gas export to FSU, Europe, Turkey and China was 16.08 bcm in November 2021, down 22% YoY. This is based on various data points released by Russian customs and Gazprom. Detailed data for November with a breakdown of gas export by country is yet to be published by the Russian customs. However, the preliminary numbers indicate that Russian-origin gas export to Europe was down 29% YoY in November.
Gas-price_Nov21_customs_SHORT_14Jan22_FINALDownload

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