the Agreement on the continuation of transit through Ukraine perpetuates Russia’s position in the European gas market. But the prolonged conflict threatens to “Gazprom” of new losses in 2020.
the Best war is the one that did not take place. In the first place the conditional rating of the main events of the Russian gas industry in 2019 could claim several: the beginning of the supply of “Power of Siberia” final solution “NOVATEK” to build “Arctic LNG 2” and the announcement of two more LNG projects in the Arctic, the sale of 6.52%, “Gazprom” “consortium” from unnamed investors. But the level of intrigue and tension, none of the stories can compare with negotiating the continuation of transit of Russian gas through Ukraine, and unexpected release on the signing of the contract at the last moment.
the Contract is not yet signed, this is expected to occur on or before 29 December, but this is still need to fulfill a number of conditions. But if Russia and Ukraine gentleman will refer to the agreements, both countries will sign a deal for themselves. “Gazprom” should pay “Naftogaz” of $2.9 billion according to the decision of the Stockholm arbitration, which entered into force in February 2018, but until now were not fulfilled. Ukraine refuses from the rest of the claims on existing contracts with “Gazprom”, from the blocking of its assets and Annuls antitrust fine (total amount of claims – more than $22 billion).
the rest of the terms of the new five-year contract take into account the interests of both parties. Committing themselves to organize transit in 2020 to 65 billion cubic meters of gas and at least 40 billion in the years 2021-2024, Ukraine maintains an acceptable level of income and the viability of its own gas transportation system, and the bonus gets lower prices for gas in the event of a resumption of direct procurement from Russia. “Gazprom” solves the problem of supply arising from not running on time the “Nord stream – 2” and “Turkish stream”and after their commissioning will be able to choose the export route to Europe and to respond promptly to fluctuations in demand. Finally, avoiding a new gas war, Russia makes it clear that as a supplier you can rely on. Any other scenario has increased the likelihood of the dramatic decline of the role of gas in the exit program on a “zero carbon footprint”, the parameters of which Europe plans to determine in the spring of 2020 For Gazprom, 85% of its exports in 2018 it had on the European market in the horizon of 10-15 years, such a development could have extremely unpleasant consequences.
Gazprom sold of 6.52% of its shares “consortium” of investors among buyers quasicanonical stock most expensive companies of Russia – pension funds Business
the Reliability of the Ukrainian transit is a guarantee of long-term conservation of natural gas in the European energy mix, says research Director Vygon Consulting Maria Belova: “the signing of the agreement would deprive many politicians of the EU a trump card not only in the fight against “unreliable” the largest supplier of gas, but polluting natural gas as such.”
In this case, taken separately and 2020 may be one of the most unsuccessful for export “Gazprom” to Europe, and it will be the result of actions including the company itself. Cowed by supply disruptions in 2009, Europe formed an unprecedented high reserves of gas in underground storage. At the end of December in them is about 95 billion cubic meters of gas (34% more than the average level in 2015-2018), together with the appearance of confidence in the continuation of transit through Ukraine has led to a drop in spot gas prices below $130 per 1,000 cubic meters (the Dutch hub TTF, 25 December). Long-term weather forecast from the ECMWF (European Centre for Medium-Range Weather Forecasts) until the end of March promises a temperature a few degrees above average.
Insurance policy in case of development of negativedevelopment scenario in the form of filled underground storage facilities, including the forces of “Gazprom”, in the mild winter will lead to a drop of export of Russian pipeline gas to Europe – the company will first sell it from stores, expects Belov. In addition, affected the export revenue, she said: “a Glut in the market, which in 2020 will be exacerbated by the launch of new LNG capacity to 25 million tons, will inevitably lead to a further decline in spot prices. According to Thomson Reuters forward curve, the lowest average monthly price of [the British hub] NBP in 2020 is expected in June – $140 per 1,000 cubic meters, However short it may fall below $100”. It is possible that the decrease in the price of gas in Europe is below $120 will follow the refusal of the buyers of us LNG from the use of booked capacity at plants in the United States that will help to balance the global market, says Belov. Low gas prices in Europe and the overall slowdown in world demand may lead to the postponement of the construction of the new LNG projects, allows the analyst IEA gas markets Gergely Molnar.
Oversupply of gas in Europe may lead to lower prices below $105 for 1,000 cubic meters, agrees analyst at Oxford Institute for Energy Studies James Henderson. It can stimulate the growth in gas demand and enhance its competitiveness in comparison with coal and other energy sources, he says, so the long-term low gas prices in 2020 is good, “but it is likely to be a tough year for sellers of gas on the continent.”
“Gazprom” will not sacrifice exports, according to respondents, the S&P Global Platts market participants. On the contrary, it will try to use low gas prices in the fight against alternative suppliers to Europe, primarily LNG. “This year will be a massacre. Prices will be killed. I think in the end, “Gazprom” will receive the domination of the market for the next 10-20 years”, – quotes Agayntstvo one of the British traders.
