The decrease in demand for gas in Europe, and as a consequence, falling prices will put pressure on Gazprom, but the company’s position in these conditions better. This is with reference to the opinion of experts in the energy market, writes RIA Novosti analysts.
The Agency reports that gas prices in Europe fell to record low levels, because underground storage facilities are filled after a warm winter, and demand has declined due to the epidemic of the coronavirus. The spot price of the most liquid European platform, the Dutch hub TTF is at the level of 90 dollars per thousand cubic meters. Thus “Gazprom” was originally budgeted for the current year the export price for gas to $ 200 per thousand cubic meters, and in February adjusted the figure to 175-185 dollars.
The experts do not consider the situation for the Russian gas concern critical. In addition, in their opinion, the situation with falling prices will hit suppliers of both natural and liquefied gas, and “Gazprom!” is in more favorable position compared to competitors. At the same time, the American kancevica will be able to withstand current prices only in the short term, but on the horizon of even a few months is unlikely.
— First of all, low prices are associated with an excess of reserves, — said Deputy General Director of the national energy Institute Alexander Frolov.
— Everyone was preparing for crisis in the event of non-renewal of transit contract with Ukraine. Underground gas storages of Europe were filled to record levels. In the beginning of the year excess stocks had to hastily get rid of storage costs money. And now the excess is not eliminated.
In the second place, a trade conflict the United States and China. China ushered in 2018 protective duties for liquefied natural gas (LNG) produced in the United States, which suppliers had to hastily deploy the flow in the direction of other buyers. In the first place — in the direction of Europe, as it has a fairly large unused capacities for receiving LNG. Although the volume of supply of American gas to Europe in 2019, according to preliminary data, amounted to about 18.5 billion cubic meters, but it has also had an impact on prices.
In the third place, the oil quotes. They also indirectly have an impact on gas. The issue of demand in the EU is now debatable.
“SP”: — How serious, in your opinion, may be this fall? How it will affect the global economy?
— Gas is not free in production. But it will depend on many factors. And the level of demand is only one of many. Also important is the level of oil prices. The volume of gas production in the most vulnerable countries.
“SP”: — And how will this affect the Russian economy? This is not so critical for us, as the price of oil?
The question the average rate of the ruble to the dollar. At the current prices and the current rate revenues are lower than planned. Gazprom is one of the largest sources of funds of the state budget.
“SP”: — is it True that the position of “Gazprom” better, than the competition? Why?
— Gazprom has lower cost than the LNG suppliers. And higher opportunities in terms of supplies than other suppliers of pipeline gas. In addition, Gazprom’s business is well diversified. A significant proportion of profits provide a high-margin petroleum products.
“SP”: — What is the price of critical for us? How long could we withstand her, and what is the probability that it will come to that?
— If to speak only about the gas, about $ 85. Here we do not consider export duties, but we believe with the met. We also consider the transportation costs. But how would forget that a significant part of the cost of transportation of Russian gas go to the address of the subsidiaries of “Gazprom” or joint projects (Nord stream).
“SP”: — How the situation will affect the U.S. position? In General, the configuration of the European market? Who are increasing their presence, and who on the contrary?
— The United States predict a decrease in oil production. It will fall and gas production. So, reduced the resource base for LNG supplies. Although it is unknown the level of demand in the domestic American market. Although I would guess that the main victims in the United States will be coal. Besides, nobody cancelled problems with a high debt load of American projects. And with falling prices, this problem will only grow worse. It is also worth considering that the level of prices at around $ 120, buyers of LNG produced in the United States, it is easier to abandon the procurement and to pay liquidated damages under the principle of “Sigi or pay”.
— Causes of low prices in Europe, few indeed, — agrees the leading expert of the national energy security Fund Igor Yushkov.
— Because of the fact that they coincided, and there is a strong drop in prices. You are ready to stop transit through Ukraine from January 1 and injected historically large amounts of underground gas storage in Europe. And transit are preserved.
The warm winter. As a result of the heating season, Europe is left with large amounts of gas in storage.
Competition among suppliers in 2019 was the record volumes of new LNG plants.
In Asia has also been a warm winter, and prices are low. As a result, the LNG suppliers have shifted to the European market. Finally, due to the fashion industry, China has reduced gas consumption and part of LNG also went to Europe.
“SP”: — it is critical For us?
For Russia, the situation is unpleasant, because the less the cost of gas, the less the export duty and mineral extraction tax. Ie, our budget does not receive income. “Gazprom” receives less profit and pay less dividends. The only plus is that now the domestic market of gas in Russia was more profitable for Gazprom than exports. It actualizes the topic of gasification. But our critical situation can not be called. Cheap gas wins inter-fuel competition not only in renewables, and even coal. So the Europeans can increase gas consumption. It is possible that by the end of the year “Gazprom” does not greatly reduce the volume of deliveries.
The situation with coronavirus in Europe is also creating problems for us. And the demand fell and prices dropped. Plus falling oil prices led to that the fact that reduced rates on long-term contracts with oil bound.
“SP”: — Competitors “Gazprom” is even worse?
Gazprom in the European gas market is not the weak link. Norway is already reviewing the plans for gas production and exports due to low profitability. The suppliers of LNG are suffering losses. Although the LNG continues to come in Europe, some of the suppliers selling at a loss. In the United States is already freezing new LNG projects.
In 2020 Likely gas prices in Europe are low. It is unlikely we will see the average price even at $ 160. The situation may improve cold winter, which will be removed from the market oversupply. Or are we going to wait a few years until the lack of investment in new projects will lead to shortages.
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