Russia Losing Natural Gas Share

[ronwagn + 6,290]

https://news.yahoo.com/equinor-gazprom-lose-european-gas-135133769.html

Equinor, Gazprom lose European gas market share as LNG surges

IMHO natural gas will become an even more low price commodity as more producing countries tap this clean, superabundant, inexpensive fuel. The oil industry will avoid using natural gas as long as it can. It is much easier to perpetuate the existing model of making money but natural gas is the fuel of the future. Meanwhile much of it is being burned and wasted, even though the oil industry has many ways to use it onsite. 

[Tomasz + 1,608]

In 2013 Gazprom exported to Europe 138 bilion m3 of gas

In 2018  record 201,7. bilion m3 

For me it looks like increasing market share not loosing it and in fact Gazprom increase market share on european market from 30 to 36 %

All I can say is that "freedom gas" is not cost competitive with russian gas- you have  breakeven price about 7,5-8 $ per mbbtu but Gazprom can sell at 4 $ with some profit because it has lowest costs of production below 1 $ per mbbtu  and pipeline transport is also a lot cheaper than shipping.

https://www.oxfordenergy.org/wpcms/wp-content/uploads/2019/03/Outlook-for-Competitive-LNG-Supply-NG-142.pdf thats very very good summary of LNG prices which tell us standard lng price for Europe is about 12 % of Brent per mbbtu and for Asia 13 % of Brent plus 0,5 $ per mbbtu. With 60 $ brent it means 7,2 $ and 8,3 $ per mbbtu (1 $ per mbbtu is equivalent of 35,7 $ for 1.000 m3) 

 

Edited August 25, 2019 by Tomasz

[Benjamin Smith + 3]

A new story has just come out, Gazprom saying that gas exports to Europe will fall for this year, expected to be on par with 2017 levels of around 192 bcm rather than last years 200 bcm. Slow demand growth and Politics to blame. Price drop of around 13% is also expected just to add insult to injury. 

Also, slightly off topic, Trump rolling back Methane regulation, so it will be interesting to see what that does to gas prices.

[Tomasz + 1,608]

You must undestand Its much more complicated  matter. Significant part of this LNG flow in winter months was Novatek from newly built Yamal I. Its not Gazprom but also russian gas in a form of LNG. It started serious production in the middle of 2018 and it can export to Europe 2 bilion cubic meters of gas per month. Loook at this chart at bottom.

So you should first add this LNG from Yamal I to total gas export to Europe and it can very well turn out this year and in second half of last year even more russian gas will find home in Europe than before.

https://www.intellinews.com/russia-s-lng-production-soaring-in-2019-166239/

https://www.reuters.com/article/lng-europe-russia/rpt-russia-ships-record-high-lng-volumes-to-europe-in-february-idUSL5N20N7ZJ

This last article is wrong in one paragraph - current capacity of Yamal I is 18 milions ton of LNG there is additional 1 milion ton coming soon, another 1 mln from Vysotsk near Petersburg and built years ago terminal in Sakhalin - old project with Exxon (capacity 11 milions tons) exporting to East Asia (Jpan China South Korea)  currently about 30 mln tons of LNG which means 42 bilion cubic meters of LNG for export.Additionaly  Novatek Arctic LNG and Gazprom Baltic LNG are coming in next decade.

Quote

 

Russia delivered a record amount of liquefied natural gas (LNG) to Europe in February, becoming the biggest supplier of the chilled fuel to the continent for the first time.

A total of 19 cargoes, or 1.41 million tonnes, of LNG from the Yamal LNG plant in Russia’s Arctic reached regasification terminals in Europe in February, with the majority of those going to northwest Europe, Refinitiv Eikon data shows.

This is the largest monthly amount of LNG from Yamal to arrive in Europe since the plant was launched in Dec. 2017 and also the first time Russia has become the biggest LNG supplier to Europe, surpassing traditional suppliers, such as Qatar, Nigeria and Algeria, as well as a newcomer, the United States.

The jump in Russia’s deliveries to Europe shows how lower-than-expected LNG demand and lower prices in Asia have made Europe a top destination for LNG produced in the Atlantic basin this winter, a drastic change from the previous winter.

None of the Yamal cargoes found a home in Asia in February, for the first time since May, data showed.

Asian LNG and European gas prices have been almost at parity this winter. This week, the Asian LNG delivery price was around $0.30 million British thermal units (mmBtu) above the UK front-month gas price, against over a $2.00/mmBtu premium a year ago.

Russia’s Novatek, a major shareholder at Yamal, has arranged a swap of some cargoes this winter to supply its Asian positions with Pacific-sources LNG, instead of delivering cargoes from Yamal to reduce shipping costs amid the low price spread.

Some traders expect the price spread will remain tight throughout 2019, with Atlantic-produced cargoes continuing to come to Europe.

Novatek and China’s PetroChina, another Yamal offtaker, have been active selling spot Yamal cargoes to Europe this winter.

The data also highlights how the low cost of Russian LNG allows it to compete for European buyers.

On Wednesday, Novatek’s Chief Financial Officer Mark Gyetvay told the IP Week conference in London that Novatek was able to deliver LNG to Europe for $3.15/mmBtu.

In February, shipments from the United States to Europe dropped to nine cargoes, or 0.64 million tonnes, the lowest level since November, largely due to lower loadings in the U.S. caused by maintenances and fog conditions at the Gulf of Mexico plants. U.S. exports dropped to the lowest level since October in February.

This is a change from January, when the U.S. was the second largest supplier of LNG to Europe after Qatar.

Supplies from Qatar have been stable at between 17-19 cargoes per month since October. In February, 18 cargoes, or 1.33 million tonnes, were delivered to Europe, which is five cargoes more than at the same month a year ago.

Nigeria delivered 16 cargoes in February, against 18 in January. Algeria supplied 18 cargoes to Europe this month, one cargo less than in January. (Reporting by Ekaterina Kravtsova; editing by Nina Chestney and Alexandra Hudson)

 

Quote

 

Russia has kept its oil and gas production capped in keeping with the terms of the OPEC+ deal, but the production of liquefied natural gas (LNG) has soared in the last year, as the Kremlin hopes to turn gas into a commodity that can be sold anywhere, like oil.

LNG output was up +86% y/y in July, according to Reuters, well ahead of all other raw material production in Russia, including crude oil.

Russia has been investing heavily into LNG production through the vehicle of privately owned LNG producer Novatek. Currently Russia produces some 10mn tonnes of LNG a year, but has ambitions to increase that to over 80mn tonnes in the coming years.

The state-owned gas giant Gazprom has also begun to invest into LNG. Gazprom expects its LNG portfolio to exceed 6mn metric tonnes (mmt) by 2020, from 4mmt in 2018.

And LNG is already a big business. Russian LNG exports surged 54.5% year on year in the first half of 2019, data published on August 8 by the Federal Customs Service shows, while piped deliveries overseas slumped 4.9%.

Shipments of super-chilled natural gas totalled 29.4bn cubic metres in the six-month period, with growth driven by Novatek’s Yamal LNG terminal reaching its full 16.5mmt per year capacity last December. Russia’s other LNG export facility on Sakhalin Island is operated by state-run Gazprom and has a capacity of more than 10mmt per year.  In monetary terms, LNG sales were up 70.1% y/y at $4.5bn, on the back of higher international gas prices.

Novatek’s stock has doubled in value in the last year on the back of ballooning profits it is making from the LNG business based on the Yamal gas field in Russia’s north. Yamal LNG posted revenues of $2.3bn in 1H19, while Ebitda stood at $1.9bn, down just 5% half-on-half even though spot gas prices dropped 40-45% h/h.

The company’s profits grew a staggering 725% in the first quarter of this year after Novatek decided to cash in on its second LNG project, Arctic LNG-2, in the reporting quarter, selling stakes to its French strategic partner Total and Chinese energy majors.

On the other hand traditional oil and gas production is rising only modestly as Russia has agreed to tread water with crude production in its deal with the OPEC oil cartel. Oil production in Russia rose to an average of 11.32mn barrels per day (bpd) in the first half of August, Interfax news agency reported on August 16, citing a source. Russia has committed to cutting output by 228,000 bpd from the 11.41mn bpd pumped in October 2018.  

Analysts were expecting crude oil extraction to grow through the remainder of the year, if Russia extracts more than prescribed by the OPEC+ deal as it did in 2H18. But if Russia remains fully compliant with the OPEC+ agreements, crude oil extraction will not show a positive growth rate in 2H19, according to VTBC estimates.

In July, crude oil extraction contracted -0.7% y/y, after the +2.8% m/m recovery from the Druzhba “dirty oil” incident this summer when large amounts of oil in the pipeline that runs across Ukraine to Russia’s European customers was contaminated with chlorides. Natural gas extraction increased by a slight 0.3% y/y, reflecting weakening demand for the commodity in Europe.

Overall Russian oil and gas production climbed further in the first seven months of 2019, despite cutbacks relating to the dirty oil crisis and a recent dip in gas exports.

Rosstat reported a modest increase in industrial production in July, but the big lacuna in the state statistics agency’s calculations is they don't take into account the LNG production, which has increased at an average of +63% y/y in 2019, according to VTBC.

“A reconstructed index of the visible output of oil & gas products suggests that LNG production is a substantial contributor to oil & gas production growth,” Alexander Isakov, chief economist at VTB Capital said in a note.

 

Edited August 30, 2019 by Tomasz

[markslawson + 1,057]

On 8/21/2019 at 12:39 PM, ronwagn said:

IMHO natural gas will become an even more low price commodity as more producing countries tap this clean, superabundant, inexpensive fuel.

 

On 8/31/2019 at 8:19 AM, Tomasz said:

Russia has been investing heavily into LNG production through the vehicle of privately owned LNG producer Novatek. Currently Russia produces some 10mn tonnes of LNG a year, but has ambitions to increase that to over 80mn tonnes in the coming years.

I hope to post fairly soon on Australia becoming the largest LNG supplier according to the US EIA, passing Qatar, thanks to massive projects coming on stream in the last few years. But the US - trust the Yanks to show off - also have major projects coming on stream which may push production up to, or past, Australia's. As noted Russia is expanding production, as is Malaysia, another major producer. This is likely to be a big challenge to coal's share of the energy market, and never mind the ravings of greenies..  

[ronwagn + 6,290]

1 hour ago, markslawson said:

 

I hope to post fairly soon on Australia becoming the largest LNG supplier according to the US EIA, passing Qatar, thanks to massive projects coming on stream in the last few years. But the US - trust the Yanks to show off - also have major projects coming on stream which may push production up to, or past, Australia's. As noted Russia is expanding production, as is Malaysia, another major producer. This is likely to be a big challenge to coal's share of the energy market, and never mind the ravings of greenies..  

Maybe someone can tell me how much of the price of wholesale LNG is unrelated to production but is just processing and transportation. I know it would vary according to destination, but I am looking for an average. I would also like to know the same facts for gasoline and diesel. Just rough estimates. 

As a retail customer I pay as much for delivery by my power company (Ameren) as I do for natural gas or electricity. 

[markslawson + 1,057]

21 hours ago, ronwagn said:

Maybe someone can tell me how much of the price of wholesale LNG is unrelated to production but is just processing and transportation.

That's a good question, but its one I can't answer.. Various agencies in Australia track the price and compare domestic wholesale with international .. if you go here and download the section on gas at the end there is a discussion on prices. The Australian Competition and Consumer Commission (trust busters among other things) also tracks prices but of course all this refers to the Australian, not the US scene..