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Gazprom sees 2021 European gas exports in range of 175-183 Bcm: Burmistrova

Highlights

'Looking at' gas balance to assess Ukraine transit

Sees 'no repeat' in 2021 of gas market oversupply

2021 'more predictable' from gas pricing perspective

Russian gas giant Gazprom expects its European gas exports in 2021 to be in a range of 175-183 Bcm, the CEO of its export arm said April 29.

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Speaking during Gazprom's annual investor day, Gazprom Export CEO Elena Burmistrova also said the company was assessing its gas balances before deciding on future transit capacity bookings via Ukraine.

Gazprom's gas exports to the Far Abroad (Europe plus Turkey minus the countries of the former Soviet Union) totaled 175 Bcm last year, meaning Gazprom's supplies to Europe could be flat in 2021 if they come in at the lower end of the forecast range.

That is despite significantly higher prices in 2021 compared with last year.

Asked why Gazprom was not booking additional transit capacity via Ukraine to take advantage of the higher prices, Burmistrova said: "You see that our booking numbers so far remain flat."

"We're now looking at our balances, the resource, and we'll see how we can move on, based on the results of Q1 actually," she said.

Gazprom's sales in the Far Abroad in the period Jan. 1-April 15 totaled 60.5 Bcm, up 28% year on year, so the new guidance from the company could mean it does not plan to boost gas exports to Europe over the remainder of 2021.

"Europe had a very cold winter, the same is true for Russia and Asia," Burmistrova said.

Gazprom has 40 Bcm/year of long-term capacity to transit Russian gas via Ukraine to Europe and can book additional capacity -- at a cost -- offered by Kyiv.

But in an auction this week, no additional capacity was booked for May at the Sudzha interconnection point on the Russia-Ukraine border despite 64 million cu m/d being offered.

Price expectations

Burmistrova said Gazprom was budgeting for a "conservative" realized European gas price of $170/1,000 cu m in 2021, but that it could end up much higher. "The current market situation gives us optimism," she said.

The company's preliminary realized European gas price for Q1 was $184/1,000 cu m, she said. "Therefore we could cautiously speak of $200-$206/1,000 cu m -- that's my guidance as of now," she said.

The company's realized European gas price last year was $134/1,000 cu m.

Burmistrova said the pricing environment in 2021 would be "more predictable" than 2020, which saw considerable price volatility, and that the likelihood of a repeat of the record low prices in summer 2020 was "practically zero."

"The need to replenish inventories will maintain demand and prices in the summer," she said, adding that the economic recovery in Europe was also set to boost demand.

She said the European gas market had become "balanced again" in early 2021 and that Gazprom was ready to compete with all suppliers to the European market.

Burmistrova also said Gazprom's long-term contract model meant it was able to cushion the impact of the low gas prices in 2020.

She said Gazprom continued to adapt its pricing strategy and to limit its exposure to price volatility.

Some 56.1% of its export volumes in 2020 were indexed to day-ahead or month-ahead prices, while 30.9% had a link to forward prices (quarter, season and year-ahead).

The remaining 13% of volumes sold had an oil link, Burmistrova said.

LNG trade, China

Gazprom also had a "breakthrough" year in 2020 in its LNG trading division, Burmistrova said.

Volumes doubled to 7.4 million mt, she said, with "significant" growth in trading activity in the spot and short-term markets.

Burmistrova said Gazprom had added a new LNG operations center in St Petersburg, working together with its London and Singapore offices. "This reinforces Gazprom's presence in the LNG market," she said.

In the longer term, Gazprom sees significant growth in Chinese gas demand, one of the company's core markets.

Chinese gas demand, Burmistrova said, was 325 Bcm in 2020, 6% higher than 2019.

Gazprom exported 4.1 Bcm of gas to China in 2020, volumes that are not included in the company's Far Abroad export levels.

By 2030, Gazprom expects Chinese gas demand growth of more than 50% compared with 2020.

Gazprom deputy chairman Oleg Aksutin said European and Chinese demand combined would reach close to 1 trillion cu m in total by 2030, with estimated 500 Bcm/year of demand in both.

Aksutin said supplies to China via Gazprom's Power of Siberia pipeline were still ramping up, with daily offtake volumes "regularly exceeding contractual volumes" into 2021.

Gazprom has said previously that exports to China via the pipeline would increase to around 10 Bcm in its second full year of operations -- 2021 -- before then increasing to its 38 Bcm/year capacity in the mid-2020s.