Post on 23-Jul-2020
Russian Pipeline Gas: Problem or Part of the
Solution?
Flame, Amsterdam , May 14, 2018
Sergei Komlev Head of Contract Structuring and Price
Formation Directorate Gazprom Export*
*Views expressed in this presentation are the author’s sole responsibility and do not necessarily
represent that of Gazprom Export
© ZMB 2
Diversification Away From Russia At Any Cost
“The EU should reduce its energy dependency on Russia, but
the EU should not back out of the mutual partnership”.
Günther Oettinger, European Commissioner designate for energy policy, January
14, 2010
“Time and time again, the clear feeling from Russia is that they
are irreplaceable and can do what they want” …”We can get
away from you; We can live without gas from Russia; It will be
costly, difficult; it will take 10 years. But we can do it”.
Vaclav Bartuska, Ambassador -at- large for Energy Security in the Czech foreign
ministry, May 26,2009
© ZMB 3
European Gas Supply/Demand Balance
Source: PJSC Gazprom, Eurostat, National Statistics, IEA, IHS Markit
In Europe Gazprom’s share
in consumption was 34.2%
in 2017 versus 27.3% in
2011 or up by 7 percentage
points
Pipeline gas is the main
source for meeting growing
demand for the imported
gas
Despite having modestly
increased in 2017, LNG
supplies to Europe still
remain significantly below
the 2011 record level
52% 53% 52% 56% 53% 48% 47%
27% 26% 30% 30% 31%
33% 34%
17% 13% 10% 11% 11%
10% 11%
4% 8% 8% 3% 5% 9% 8%
0%
10%
20%
30%
40%
50%
60%
70%
80%
90%
100%
2011 2012 2013 2014 2015 2016 2017Indigenous production Gazprom export
LNG Other Imports
Gazprom’s Market Share In Europe Is On A Rise Course
© ZMB 4
52.5% 53.5% 52.3% 55.4% 52.1% 48.1% 46.4%
47.5% 46.5% 47.7% 44.6% 47.9% 51.9% 53.6%
551,4 542,1 540,5
485,6 506,8
541,8 568,3
0
100
200
300
400
500
600
2011 2012 2013 2014 2015 2016 2017
Indigenous production Imports (+balance of storage)
Consumption
European Natural Gas Demand Recovery
European Gas Balance, bcm*
Source: IEA, Eurostat, National Statistics, IHS Markit
* Hereinafter except as otherwise noted: European countries with Turkey (excluding CIS and Baltics)
GCV = 8,850 kcal/cm, t = 20°C
Gas demand recovered
above 2011 level due to:
Broader use of gas in
power generation
Drop in demand for
coal
Economic growth in
leading European gas
markets
Growing demand and
declining indigenous
production over the last
four years led to increased
import requirements
Gazprom met two-thirds of
the incremental demand
growth in 2017 and proved
its ability to fill in any
additional supply/demand
gap
© ZMB 5
Russian Pipeline Gas is the Major Source of
Volumetric Flexibility for Europe
200
300
400
500
600
700
800
19
98
19
99
20
00
20
01
20
02
20
03
20
04
20
05
20
06
20
07
20
08
20
09
20
10
20
11
20
12
20
13
20
14
20
15
20
16
20
17
20
18
mm
cm
/d
1998-2004: 68-121 mmcm/d seasonal swing range
2005-2017: 89-234 mmcm/d seasonal swing range
713.4 mmcm/d
Source: IEA, ENTSOG
© ZMB 6
Amplification from Minimum Daily Deliveries is up to 255 mmcm/d*
* Estimated as the difference between the highest daily deliveries in each month and minimum daily deliveries in May 2017
Source: ENTSOG, Gazprom
© ZMB 7
LNG Deliveries to the European Market in Q1 2018 were Down
Q1 2017 Q1 2018 change (bcm)
change (%)
Qatar 5.1 4.9 -0.2 -3.9%
Nigeria 3.5 3.7 0.2 5.7%
Algeria 4.0 3.7 -0.3 -7.5%
Russia (Novatek) 0.0 0.8 0.8
Norway 1.3 0.8 -0.5 -38.5%
Trinidad and Tobago 0.2 0.7 0.5 250.0%
Peru 1.0 0.4 -0.6 -60.0%
USA 0.8 0.4 -0.4 -50.0%
Angola 0.3 0.1 -0.2 -66.7%
Equatorial Guinea
0.2 0.1 -0.1 -50.0%
Dominican Republic
0.1 0.0 -0.1 -100.0%
Lithuania (re-export) 0.0 0.0 0.0 -100.0%
TOTAL 16.4 15.7 -0.7 -4.3%
Despite growing gas
demand in 1Q 2018
(+0.9 bcm or +0.5%)
LNG deliveries to the
European market fell
in 1Q 2018, being
attracted by other
markets with higher
margins
Source: IEA, ENTSOG
© ZMB 8
Asian Seasonal Price Premium Serves as the
Main Attraction for Spot LNG
Sources: Bloomberg, Interfax-GGA, Customs Statistics of S. Korea
© ZMB 9
Incremental Demand For LNG In Jan.-April. 2018 Came From Asia
Net LNG Demand Increase in Jan-Apr 2018 vs. Jan-Apr 2017
Source: IHS Markit
* Excluding Mexico
12,9
0,2 -0,5 -0,4 -2,2 -2,2
-4
-2
0
2
4
6
8
10
12
14
Asia North America Middle East Latin America* Africa Europe
© ZMB 10
LNG Ignored Demand Hikes in Europe in January-April 2018,
While Dedicated Pipeline Gas Did Not
5,1 5,6 5,7
5,2 5,8
4,6 5,3
4,3
0
2
4
6
8
January February March April
bcm
19,1 16,3 15,6 15,8 17,3 17,4
19,7 17,2
0
5
10
15
20
25
January February March April
2017 2018
bcm
LNG Deliveries to Europe, bcm
Gazprom Export Deliveries to Europe, bcm
Source: IEA, ENTSOG
© ZMB 11
Another Advantage Of LTCs Over Spot Deliveries: Linkages To
Longer Term Forward Contracts Provide With Price Stability
Source: Source: Gazprom export based on Bloomberg data
Abnormally cold weather in February-March 2018 caused day-ahead price hikes
© ZMB 12
Although Correlation of Gas Prices with Coal Price Increased
Positive Price Spreads Between DA and MA Prices Point to
Emerging Gas Deficit
* At the basis of daily quotes ** Quotes with delivery in the same month are used
Source: Gazprom Export
Gazprom’s Market Share Is not a Threat to Competition in the
EU due to Real and Virtual Competition with the American LNG
0,00
1,00
2,00
3,00
4,00
5,00
6,00
7,00
8,00
9,00
0
50
100
150
200
250
300
350
USD
/mm
btu
USD
/mcm
US LNG breakevenprices (full cyclecosts)US LNG short-run
marginal costs(excl. tolling fees)TTF Month Aheadand Futures
Germany border
price (BAFA)
Prices of US LNGdeliveries to Spain(Cedigaz)Prices of US LNG
deliveries to Italy(Cedigaz)Prices of US LNGdeliveries to UK(Cedigaz)
10.0
8.5
7.1
5.7
4.3
2.8
1.4
0
Source: Bloomberg, Cedigaz, IHS Calculated on the basis of Henry Hub Futures prices, P = HH * 115% + X where X – costs of liquefaction, shipping to Europe, regasification
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