Question of the day: will Europe rescue Gazprom from the ruins?
Analytics

Question of the day: will Europe rescue Gazprom from the ruins?

10 July , 17:01
This year may become disastrous for the largest Russian company, but thanks to European customers the probability of the salvation still remains.

Analysts in the media and social networks are actively discussing the problems of Gazprom, wondering if the "national treasure" will cope with them, or go into oblivion? So Pavel Vishnevsky writes on his blog:

“It is interesting to watch the story of the downed bomber, the Gazprom company, transformed in the early 2000s by President Putin into a political club, from which all nearby countries trembled. Threats to shut off gas or raise prices by tens of percent really forced many presidents to choose words in relation to Putin, and influenced the politics of entire countries. All this ended in 2008, with the beginning of a new bear cycle in raw materials, and Gazprom from that time is increasingly plunged into the abyss of inefficiency and losses, at the end of which it will be divided into several small companies..."

Vishnevsky, in his assumptions, refers to experts interviewed by Forbes who predict that by the end of the year, gas exports could be reduced to a minimum of 15 years. The reasons are clear: coronavirus, warm winters, competition with LNG. In the first five months of 2020, according to the Federal Customs Service (FCS), Gazprom’s export, which has a monopoly on the supply of pipeline gas abroad, fell 23.3% to 73 billion cubic meters. m. The company's revenue from exports in January-May fell by 53%, to $ 9.7 billion. This is a sensitive blow to business - Gazprom sells about the same amount of gas abroad as it does domestically. According to Fitch Ratings, Gazprom Group’s EBITDA could collapse from $ 29 billion to $ 15 billion in 2020.

Gazprom will be supported in 2020 only by domestic sales, which demonstrate some stability, and Gazprom Neft, analysts say, who do not expect a quick recovery in gas prices, like in the oil market. Containing them, even if the situation with demand begins to improve, will include the export of liquefied natural gas (LNG) from the United States, which may increase during seasonal demand in the fall.

The European gas market has become more competitive, and the time when it was possible to earn extra profits on it has ended, ”experts interviewed by the publication emphasize.

***

At the same time, Gazprom tirelessly seeks a way out of the crisis. About one of these writes the telegram channel Benzokoloniya:

Gazprom will create a special forces company in Mongolia to build and manage the Power of Siberia-2. The decision is expected, because usually these companies are created to implement specific projects. Meanwhile, the construction of the second branch is in full swing, despite the problems with the resource base in Chayadin.

Initially, the pipe was supposed to go directly to China without intermediaries, but due to environmental requirements and a difficult terrain, the “Siberian power” was decided to be moved. On the one hand, the route through Mongolia reduced the length of the pipeline by almost 1000 km, and on the other, increased long-term risks. Using European projects as an example, Gazprom knows: the fewer countries involved in laying, the better. Therefore, Miller did not dare for a long time, but in December 2019 he agreed to the inclusion of Mongolia - there was no choice.

As long as the gas in the Power of Siberia-2 is cheap, China will protect it, so there is nothing to worry about. But just in case, as if anticipating the future, it was decided to extend the pipe to Yamal. And then all of a sudden there will not be enough reserves on other resource bases to ensure supplies, or Beijing will not like the project. Then, in any case, it will remain the first and only connecting link for gas transmission systems of the east and west of Russia..."

And the popular Metodichka channel looks into the future of Russian gas with some optimism:

“The US election campaign has opened an amazing window of opportunity in Europe, including for Russia. While in America they decide to take sides of the unbridled BLM-Marxists-Antifa (and the inhabitants of the central states are hastily buying up weapons), European countries are seriously concerned about their own interests. If before that the Old World obediently followed Washington’s policy wake, now Boris Johnson, looking at the monuments falling from pedestals, does not think that it was such a good idea to always give in to the USA. Brexit was left without overseas sponsorship, so it seems that again will have to be friends with those who do not speak English.

So, "Nord Stream-2" received the long-awaited amnesty from the old woman of Europe. Following Germany, which publicly refused to “invent” problems for Gazprom, the Danish Energy Agency allowed pipe-laying vessels with anchor positioning to participate in the construction of the Nord Stream-2 gas pipeline in Danish territorial waters. It can be assumed that the Kingdom of Denmark feels some guilt (very small) for the approval of the laying, which lasted for more than 2 years, which ultimately led to the fact that the previous contractor did not have time to finish the Danish site.

In the end (let’s not rush things), the gas puzzle made life. After a warm winter and a coronavirus pause, so far, energy resources have been in abundance, but this is only for now. Definiteness from Washington should be expected no earlier than mid-November. And Russia will somehow agree with Kanye West..."

By the way...

The European Union - the largest consumer of Russian hydrocarbons - intends to completely abandon fossil fuel sources, such as oil and gas, said European Commissioner for Energy Kadri Simson.

“The EU’s goal is to become climate neutral by 2050”, Simson said at a briefing on Wednesday, answering questions about the fate of the Nord Stream 2 pipeline.

“This means that by then we will be phasing out fossil fuels”, - she explained, adding that all EU suppliers should “keep this in mind” (quotes from Interfax).

European countries, according to Simson, intend to abandon not only oil, but also methane (natural gas), which should be replaced by "decarbonized gases", primarily hydrogen.

The European Commission on Wednesday approved two strategies aimed at achieving "climate neutrality." The first requires the creation of a single energy market and the diversification of suppliers, the second requires the mass production of pure hydrogen for energy purposes.

For Russia, EU policy means scrapping the model of the economy that has existed since the 1970s, in which hydrocarbons are exported to the West, and everything that the country is not able to produce on its own is bought with the proceeds of the currency.

Last year, of the 419 billion dollars of Russia's export revenues, 60% was provided by three goods: crude oil (121.4 billion dollars), petroleum products (66.9 billion dollars) and natural gas (19 billion dollars). Half of these revenues came from Europe, where the share of Russian oil in consumption reaches 30%, and gas - 40%.

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