Gazprom Eyes Exports Rising in 2016

Gazprom's deputy CEO Alexander Medvedev expects the company to deliver 165bn m³ to Europe this year, up from last year's 158.6bn m³. Western European countries accounted for about 82% of the company’s exports from Russia, while central European states took 18%.

He told a press conference May 31 that "this a very realistic figure, but I do not exclude the possibility of it going even higher if the autumn and winter are average or even mild." He said export figures for the January-May period were already 16% above 2015 figures year-on-year. Several European companies with contracts with Gazprom, such as Italian Eni, have agreed to maximise their offtakes this year, which will probably lower hub prices, in the absence of an equal rise in demand.

This rise in volume rather than a cut is in line with the general view that Russian gas will compete on price with US LNG. The first cargoes have been taken mainly to Latin America, the Middle East and Asia since the first train at Sabine Pass, Louisiana, began operations.

Addressing an IEA workshop on Eurasian gas markets in mid-April in Paris, Sergei Komlev, the head of the company’s contract structuring and pricing directorate, said the full costs of US LNG delivered to Europe are consistently higher than European hub prices on the forward curve, out to 2020. Sales to Europe will not compensate the full costs of the off-taker from the US LNG terminal on that basis, he said. The price difference with US LNG and Asian prices is much lower, but forecasts vary in accuracy.

Gazprom sells LNG to Asia, including equity gas from its Sakhalin Energy plant, but not pipeline gas as there is no pipeline yet in place. Gazprom CEO Alexei Miller met Wang Yilin, his counterpart at state CNPC, at the Black Sea resort Sochi on May 30 to discuss planned gas supplies to China via the eastern and western routes, which will involve developing the giant fields in eastern Siberia.

William Powell