[Premium] Gazprom 2017 Exports, Output Up
Gazprom boosted[1] its production in 2017 with more than 470bn m³ produced, 12% more than in 2016. In absolute terms, it is an increase of over 50bn m³ on 2016, leading to a theoretical spare production capacity of 90bn m³. But this production level is still 13.9% below its record level of 2008.
Gazprom Yearly Production
.png "Source: Gazprom, thierrybros.com")
Source: Gazprom, thierrybros.com
For European Union alone, we can estimate that total Russian imports were 165bn m³ (using EU measurements, rather than Russian). Even if it is too early to calculate year-on-year growth[2], this should be above Norwegian pipe exports growth (+8% at 117.4bn m³) according to Gassco[3] and above expected total EU demand growth[4]. This means that Gazprom’s market share should continue to grow from the 33% recorded in 2016…
In 2017, Nord Stream delivered 51bn m³ (Russian or 47bn m³ under EU standards) of gas to Germany[5], accounting for 29% of the total Russian pipe gas received in EU.
2017 split of Gazprom's exports to the EU
.png "Source: Gazprom, Entsog, Nord Stream, thierrybros.com")
Source: Gazprom, Entsog, Nord Stream, thierrybros.com
Gazprom has rightly chosen the direct link Nord Stream 1 over any other routes and should continue doing so.
Estimated FY 2017 load factor for Russia-EU routes
.png "Source: Gazprom, Entsog, Nord Stream, thierrybros.com")
Source: Gazprom, Entsog, Nord Stream, thierrybros.com
Hence with the lifting of the ban on utilising full capacity on Opal, Gazprom should, in 2018, prefer to use Nord Stream 1 at close to full capacity all year [6]. So, we could have another 8bn m³ rerouted from Ukraine to Nord Stream 1.
But even with record EU exports, Gazprom’s production is down on 2008 for two reasons: smaller sales in Russia as independent gas producers and Rosneft take market share; and a drop in FSU exports. And here the Ukrainian case must be looked into. In 2008, Naftogaz imported 53bn m³ from Russia[7] vs 0 in 2016 and 2017. But the arbitration tribunal decided in December 2017 that Naftogaz has an annual contract volume obligation for the future of 5bn m³ (with minimum annual volume of 4bn m³)[8]. So, EU that is providing gas to Ukraine via reverse flow should need 4bn m³ less from 2018…
What could 2018 look like with Nord Stream full use & Ukraine buying 4bn m3 of Russian gas
Source: Gazprom, Entsog, thierrybros.com
With at least 33bn m³ of actual spare transportation capacity to the EU via Ukraine and Belarus and expected reduced cap in Groningen production, Gazprom can further increase its EU market share in 2018, if it so wants. But that offer might not be welcome at the European Commission.
Thierry Bros
18 January 2018
Advisory Board Member of Natural Gas World
[1] Russian standardsbn m³ in http://www.gazprom.com/press/news/miller-journal/2017/731937/
[2] Estonia (0.1bn m³ consumption in 2016) and Latvia (1.3bn m³ consumption in 2016) were not reported in Gazprom’s Exports European sales in 2016, Gazprom’s REMIT data started only in July 2016 and some gas exported could have been put in storage instead of sold.
[3] https://www.gassco.no/en/media/news-archive/clear-record-set-for-norwegian-gas-exports/
[4] Forecasted at 6% by Eurogas in November 2017 http://www.eurogas.org/uploads/media/Eurogas_press_release_-_Higher_gas_demand_in_2017_helps_lower_emissions.pdf
[5] https://www.nord-stream.com/press-info/press-releases/nord-stream-reaches-average-utilisation-of-93-in-2017-51-bcm-delivered-to-the-european-union-500/
[6] We believe Nord Stream 1 actual capacity is 55bn m³/y (EU standards – 59bn m³/y Russian standards).
[7] http://www.naftogaz-europe.com/article/en/NaturalGasSuppliestoUkraine
[8] According to Naftogaz in www.naftogaz.com/www/3/nakweben.nsf/0/420535239D6BB85CC22581FE004A9314?OpenDocument&year=2017&month=12&nt=News&