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Russia's Gazprom sees gas exports in 2020 at 166.6 Bcm: official

Highlights

Would mark significant fall from 2019 volumes

Sees average realized price of $133/1,000 cu m

Market environment a 'perfect storm': Ivannikov

London — Russia's Gazprom expects its gas exports to international markets to total 166.6 Bcm in 2020, which would mark a significant reduction from supplies last year of 199.3 Bcm, a senior company official said Wednesday,

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The forecast is the first Gazprom has given for 2020 and reflects the extreme shift in European gas market dynamics since the turn of the year.

Alexander Ivannikov, the head of Gazprom's finance department, told analysts on a conference call that the volume target was, however, under continuous review given the fast-changing market environment.

"The gap between this year's volumes and last year's is very material," Ivannikov said.

The 199.3 Bcm refers to Gazprom's gas sales in the Far Abroad -- Europe plus Turkey and China, but minus the countries of the former Soviet Union -- and the target given for 2020 is likely to cover the same parameters.

Should Gazprom's supplies come in at the expected volume, it would represent the company's lowest sales to the Far Abroad since 2015 when it recorded sales of 158.6 Bcm.

As recently as February, Gazprom said its ambition was to keep its sales in the Far Abroad at around the 200 Bcm/year mark through the 2020s.

Ivannikov said the current market environment -- with record low prices and weak demand -- was the result of a "perfect storm" of bearish factors including the second consecutive mild winter in Europe and the outbreak of the coronavirus.

He said Gazprom was currently budgeting for an average realized sales price in 2020 of $133/1,000 cu m -- which would mark a sharp fall from the average realized price of $211/1,000 cu m last year.

"We're not dogmatic about these numbers -- they can change," he added.

At the end of March, Gazprom CEO Alexei Miller said the company was hopeful about the European market in Q3 and Q4, saying it was "too early" to draw conclusions about the state of the market from the first few months of the year.

However, Gazprom has also stopped publishing monthly production and export data since the start of 2020 having issued short statements at the start of each month over the past few years.

Company 'resilience'

Despite the negative outlook for volumes and prices for 2020, Ivannikov said the company was still demonstrating "resilience" in the face of the challenging market environment.

Ivannikov said Gazprom's portfolio of long-term contracts showed "stronger dynamics" than the European gas hubs.

"The current market environment has fallen 'off balance' and all oil and gas companies are impacted," he said. "But Gazprom maintains its long-term position due to its competitive edge and ability to adapt."

Gazprom, he said, benefited from its low cash-cost of gas production and well-developed transportation infrastructure.

Gazprom also believes gas prices in Europe and Asia could rise by two- or three-fold in the coming years depending on the pace of the recovery of gas demand post-coronavirus.

Ivannikov said Gazprom was also taking additional financial steps to optimize its operational costs.

These include cash-flow management and optimizing gas procurement activities.

"Costs are also coming down too," he said, including the rate of mineral extraction tax that Gazprom pays to the government.

"So that's not a cost saving, but the [impact] on operating expenditure is clearly visible," he said.