RUSSIA MONITOR

Date: 26 February 2019

Gazprom Confident of Its Position in Europe

Russia’s gas giant does not fear competition and it intends to retain its market shares in Europe, company officials told investors in Hong Kong. With its recent optimistic assumptions and bragging about incomplete results achieved in the previous year, which prompted that the company management sought to announce them as soon as possible, Gazprom probably aims to reassure both investors and markets after announcing that two deputy heads in charge of the firm’s strategic activities had been relieved from their obligations.

SOURCE: GAZPROM.COM

The head of Gazprom Export, Gazprom’s most important subsidiary, Elena Burmistrova gave a presentation in Hong Kong on February 26. In 2018, Gazprom delivered 201.8 bcm of gas to the EU and Turkey, which enabled the firm to increase total market shares from 34.2 to 36.6 percent. “We will maintain a similar level in coming years,” Burmistrova said. The firm seeks to retain market share in Europe of no less than 35 percent, expecting an average gas export price to hit $230-$250 for 1,000 cubic meters in 2019. In 2018, Gazprom’s average gas price in Europe rose by 24.6 percent, amounting to $245.50 per 1,000 cubic meters. In the first nine months of 2018, Gazprom’s revenues from gas exports were 2.14 trillion roubles, or $32 billion. If the firm maintains the price of $250 for 1,000 cubic meters of gas while retaining market shares in Europe of no less than 35 percent, its total revenues will hit $50 billion in 2019. This goal can, however, be difficult to attain because gas spot prices dwindled to $210 owing to mild winter weather. As estimated by analysts from various financial institutions, the average price of Russian gas in Europe is expected to hit $230-$240 this year. Also, Gazprom faces a possible rise in U.S.-sourced liquefied natural gas (LNG) supplies to Europe, as a result of which Russian exports may drop to 190 bcm of gas by 2020.

At the Hong Kong presentation, Burmistrova negatively assessed the competition from the United States, saying that non-Russian LNG deliveries covered no less than 13 percent of Europe’s total demand in 2018, down from 17 percent in 2011. Gazprom Export CEO noticed that since then the LNG facilities have been significantly expanded, which means that European countries prefer to purchase Russian blue fuel, despite considerable diversification possibilities. The U.S. administration recently issued a permit to construct the Calcasieu Pass LNG export facility in Louisiana from where U.S.-sourced liquefied natural gas may be exported to Europe. It is scheduled to become operational in 2022. The facility is to be built and operated by Venture Global LNG. In 2018, the United States shipped 15 million tonnes of liquefied natural gas to Europe, hoping to double volumes by 2023.

Since 2014, Elena Burmistrova has headed Gazprom Export, an exporting arm of Gazprom in charge of selling Russian gas to foreign market. After Alexander Medvedev, Gazprom’s deputy chief executive and de-facto head of exporting business, has left, Burmistrova may be responsible for overseeing this sensitive field of the company’s activity. Her main rival, Mikhail Sereda, is a close aide to Gazprom CEO Alexei Miller. Final decisions in this respect are soon expected to be made.

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