Gazprom for European Market: Reliable Supply in a Changing Environment

Transcription

1 Gazprom for European Market: Reliable Supply in a Changing Environment Valery NEMOV Deputy Head of Contract Structuring and Pricing Directorate The Hague - 4 September

2 Gazprom Group Natural Gas Supplies to China поставки по «восточному» маршруту Gazprom JSC and CNPC signed the sales and purchase contract for gas supplies through the Eastern route. поставки из Центральной Азии Пекин Харбин Чангунь Шэньян Term of supplies: 30 years Annual supply volume: 38 bcm on plateau Beginning of supplies: (dependent on when the construction period is gone to end) LNG import terminals on stream planned поставки из Мьянмы LNG supplies Шанхай Гуанчжоу Routes of piped gas imports pipe routes on stream future supplies routes from Russia Gazprom Group Natural Gas Supplies are not going to compete with LNG import on Chinese market: - Supplies of piped gas through the Eastern route will compound the consumption base in the North-East of China - LNG supplies are targeted to coastal regions and playing the balancing role. - Growing Chinese market is still open for the future increase of supplies. 2

3 Long-Term Contract Gas Exports in 2013 Slovenia; 0,5 Romania; 1,4 Switzerland; 0,4 Serbia; 1,9 Denmark; 0,3 Netherlands; 2,1 Croatia; 0,2 Greece; 2,6 Bosnia; 0,2 Bulgaria; 2,8 Finland; 3,5 Austria; 5,2 Germany; 40,1 Slovakia; 5,4 Hungary; 6,0 Czech Republic; 7,3 France; 8,2 Poland; 9,8 Turkey; 26,7 *Far abroad Source: Gazprom export UK/Belgium; 12,5 Italy; 25,3 Total* bcm 3

4 Supplies to Europe by Largest Gas Producers in 2013 Supplies by Largest Gas Exporters Change in 2013 (bcm) Change in 2013 (%) Russia (Gazprom) % Algeria (inc. LNG) % Lybia (inc. LNG) % Qatar % Nigeria % (bcm) Supplies by Largest European Producers (bcm) Change in 2013 (bcm) Change in 2013 (%) Norway* % UK % Netherlands % * Для Норвегии показаны объемы газа и СПГ, поставленные на европейский рынок. Объемы СПГ, поставленные в Азию и Америку, не учитываются. Источники: Базы данных Международного энергетического агентства, Евростата, национальных статистических агентств, компаний «ВудМаккензи» и «Ллойдс» по состоянию на январь 2014 г., оценки ООО «Газпром экспорт». 4

5 % Key International Markets for Gazprom Europe and CIS Gazprom Gas Deliveries to Europe* Gazprom Gas Deliveries to CIS and Baltics bcm $/mcm $302 $383 $402 $387 $235 $298 $308 $ * European countries including Turkey except for CIS and Baltics The Gap is Widening Between European Indigenous Production and Consumption Mid-Term Forecasts of Gas Consumption in Europe % Actual CERA ( ) CERA ( ) CERA ( ) PIRA (2012-3) PIRA (2013-7) PIRA ( ) CEDIGAZ - pessimistic (2013-6) CEDIGAZ - base (2013-6) 90,4% 90,8% 91,6% 90,3 90,2 88,3 88,5 86,0 86, ,6 ~ bcma Under current market conditions the midterm ( ) estimate of gas deliveries to Europe is bcma, depending on weather 5

6 Jan-12 Feb-12 Mar-12 Apr-12 May-12 Jun-12 Jul-12 Aug-12 Sep-12 Oct-12 Nov-12 Dec-12 Jan-13 Feb-13 Mar-13 Apr-13 May-13 Jun-13 Jul-13 Aug-13 Sep-13 Oct-13 Nov-13 Dec-13 Jan-14 Feb-14 Mar-14 Apr-14 May-14 Jun-14 % Weak Demand for Gas in Europe European Gas Consumption and Imports in 2013 Consumption (bcm) Indigenous production (bcm) /11, % % % Industrial production -0.5% Weather index +0.5% Imports* (bcm) % Source: International Energy Agency, Eurostat, Gazprom Export. Gas calorific value: 1cm = 37 MJ * Including balance of gas storage Gas burned for electricity ~ -14% Net Heating & Cooling Degree Days* 10% 15 Industrial Production Index on Key Markets 5% % % -10% * Relation to 14-year average Source: Gazprom Export (based upon annualized HDD/CDD for Europe) Germany UK Italy France Turkey Source: National Statistics Authorities 6

7 Even Weaker Demand for Gas in Europe in 2014 European Gas Consumption, storage balance and Imports in 1H2014 1H H 2014 (bcm) (%) Consumption (bcm) % Indigenous production (bcm) % Gas storage withdrawal/injection balance** % Import needs* (bcm)*** % Gas consumption in Europe has dramatically dropped in 1H2014 by 18.5% in comparison with 1H2013. In gas supply, this volumes have been partially compensated by significant decrease of indigenous production. 3.4 bcm of gas less were withdrawn from storages in European countries, than injected in them in 1H On the contrary, in the same period 2013 more by 20.1 bcm. It means that 23.5 bcm of gas from storages less were used, and that made the most considerable in gas supply cut. Decrease in import needs made up, по предварительным данным, according to calculations and estimates, 20.6 bcm. * Поставки газа из Норвегии учтены в графе «Собственная добыча». ** Отбор в случае положительного знака, закачка - отрицательного *** Предварительная оценка объема импорта, рассчитанная по трем верхним значениям. Источники: Базы данных Международного энергетического агентства, Евростата и национальных статистических агентств по состоянию на апрель 2014 г., оценки ООО «Газпром экспорт». 7

8 Weather Impact Weather index for 1H2014 in relation to average Milder than average weather conditions were responsible for the significant drop in gas consumption during 1H 2014 in all major countries Calculated by Gazprom export на основе данных о погодных условиях более чем в 130 областях различных европейских стран. Значения индекса выше 100 % отражают благоприятные погодные условия (холодные зимы, жаркие лета) для роста потребления газа. Низкие значения отражают неблагоприятную погоду для потребления газа. 8

9 Negative Trends in Gas Consumption for Power Generation Gas consumption in power generation sector and other sectors in the largest European countries* (estimate) (bcm) 1H H 2014 г (bcm) (%) Total gas consumption % Gas consumption in power generation Power generation share in gas consumption structure % 12.8% 12.5% -0.3 p.p Gas consumption in other sectors % * the following countries are included in this group: - Germany, - Italy, - UK, - Netherlands, - France, - Spain, - Poland. Sources: PIRA, Gazprom export estimates Gas consumption decrease rate in power generation sector in 1H 2014 is larger than in other sectors and makes up 23.6%. Nevertheless, as the share of power generation in gas consumption structure so significantly declined under negative trends in the past, it is currently not a factor that determines the total level of consumption. 9

10 Long-Term Prospects of Gas Consumption bcm Average EC IEA IHS CERA PIRA Exxon Mobil Oxford IES BG BP Wood Mackenzie Cedigaz EIA EGF Statoil Total Enerdata Average EC IEA Exxon Mobil Oxford IES BP IHS CERA Cedigaz Enerdata EIA Statoil Updated: July 2014 Source: Projections derived from consultants, companies and governmental bodies, Gazprom export calculations 10

11 Long-Term Prospects of Gas Production bcm Average IEA IHS CERA EIA Cedigaz PIRA EC Average EIA IEA IHS CERA Cedigaz PIRA EC Updated: Обновление: July 2014 июль июль 2012 Source: Projections derived from consultants, companies and governmental bodies, Gazprom export calculations 11

12 The Gap is Widening Between European Consumption and Indigenous Production bcm According to forecast, European demand for additional gas imports will amount to: 164 bcm by bcm by Wide spread of consumption forecasts by 2025 is due to the «anti-gas» scenario by the European Commission and the «super-gas» scenario of the European Gas Forum Production forecast spread Production consensus forecast Consumption forecast spread Consumption consensus forecast Updated: July 2014 Source: Consensus projections derived from consultants, companies and governmental bodies 12

13 Dynamics and Geographical Structure of Gas Demand Gazprom s Forecast tcm: North America 19% 26% 25% 22% Central and South America OECD Europe 3% 12% % 15% 20% 5% 14% 17% 5% 13% Other Europe and Eurasia Middle East Africa Asia Oceania forecast Moscow, 04 April из 21

14 Mutually Beneficial Europe Russia Dependency 600 bcm Gas consumption forecast for European Far Abroad up to year 2030 Key information 4 tcm Obligations before the International Group of Companies for years tcm proven resources Gazprom has been a reliable supplier for more than 40 years Contribution of Gazprom to EU Gazprom has already supplied more than 3 trillion cm of gas to European customers Minimum Annual Quantities of gas in Gazprom s LT contracts portfolio ensure deliveries around 4 trillion cm of gas to Far Abroad during all the period of validity (including new volumes related to the projects of North Stream and South Stream) Gazprom is the world s largest source of gas ( proven reserves are 35.7 trillion cm) Contribution of EU to Gazprom This makes possible long-term supplies to Europe for more than 50 years EU one of the consuming markets for Gazprom Supplies to EU ensured steady revenues for Gazprom for 40 years Relations with the major gas business counterparts in the EU Source: Gazprom in Figures, Gazprom export corporate brochure 14

15 Reliability of Gas Supply to Europe The existing structure of Gazprom long-term contracts fully guarantees the reliability of gas supply to Europe Balanced bilateral long-term commitments The Buyer and the Seller share price and volume risks International arbitrage Flexibility Supported in many cases by intergovernmental agreements Major suppliers to Europe have similar contracts 15

16 Gazprom is not a Threat to Competition in the EU Gazprom s EU market share is 27,6 % (30,2% - in European Far Abroad) in 2013 The prices of Russian gas are fully competitive and are subject renegotiate European customers are perfectly protected by long-term oil-indexed contracts against any form on monopoly abuse of power Long-term contracts in place, the European customer not the supplier is who defines daily gas volumes within the contractual flexibility (DCQ nominations) 16

17 Trading Point (Hubs) as Price Reference Indicators The new organizing model of gas market in the EU gives preference to trading in hubs Regulatory displacements of LT-contracts delivery points from national borders to hubs under 3 rd Package requirements did not result to effect that was previously expected any significant increase of liquidity did not happen Only OTC-deals are usually registered on small hubs, but not exchange transaction, which are lacking for a lot of weeks or even months. Buying volumes of gas in an impersonal and standardized way is impossible. That means, there is no any exchange gas trading on the most of EU territory The potential of directive liquidity increase leverage is at the end of its resource Turnover Coefficient of European Gas Trading Points («churn ratio») in 1H in comparison with 1H bcm UK NBP Nethelands TTF Germany total France PEG Austria Italy PSV Belgium Baumgarten/VTP Zeebrugge Volume of trading 1H 2013 Volume of trading 1H2014 Churn ratio (right axis) 1H 2013 Churn ratio (right axis) 1H2014 * Source: LEBA, International Energy Agency 17

18 Removal of Midstream Flexibility Threatens Energy Security 600 MCM/d Gazprom is the major provider of supply flexibility to Europe as seasonal swing in Russian gas daily deliveries doubled MCM/d seasonal swing MCM/d seasonal swing Source: International Energy Agency database

19 Explanation of the Contract-Hub Price Gap: Contracted Gas Offers Enhanced Delivery Flexibility Cost of Seasonal Midstream Flexibility Cost of Short-term Midstream Flexibility (1) Cost of Short-term Upstream Flexibility (2) Average cost of full-cycle gas storage (assumes that over the year the volume of gas pumped into underground storage equals to the volume of withdrawals) Additional transportation capacity payments for flexible capacity (7,000 hours of flexibility) Average price for a 10% daily production swing in UK (Deloitte) US$21.45/mcm US$13.7/mcm USD$ 4.0/mcm

20 Threats are on the Market, but not on the Supply Side Gone out from electricity generation, gas consumption is now a function of unpredictable weather Wide renewable penetration into the energy consumption structure makes gas demand twice dependent on weather After midstream business is dead, nobody is taking responsibility for supplies structuring Higher risks of gas undersupply during cold snaps Flexibility cost is underestimated, and the mechanism for that should be developed 20

21 Thank you for your attention