Gazprom Faces Lowest Gas Prices in Europe in 15 Years

With prices in rapid decline due to the fall in demand amid the coronavirus outbreak, Russian energy giant Gazprom might be getting the lowest gas price in 15 years from its primary market — Europe — this year, Kommersant reports.

Spot prices have fallen to the level of $100 per 1,000 cubic meter, while oil-related prices are approaching that level. Gas supplies to Central Russia can be more profitable now than exports to Europe. For example, in the Leningrad Region, the wholesale gas price at the current ruble exchange rate is $57.7 per 1,000 cubic meters.

On the other hand, the export netback value for Nord Stream supplies to Germany at current prices at the German NCG hub of $101 per 1,000 cubic meters is about $48 (taking into account the export duty of 30% and transportation fees of about $22 per 1,000 cubic meters).

A Gazprom source told Kommersant that the company had received no reports of force majeure circumstances on long-term supply contracts to Europe and had no plans to suspend gas purchases from Central Asia or change the deadlines for implementing its investment projects.

Referring to export prices, the energy monopoly cited Elena Burmistrova, Deputy Chairperson of the Gazprom Management Committee, who said she expected an average level of $175-185 per 1,000 cubic meters this year.

However, Vygon Consulting Research Director Maria Belova considers this forecast to be optimistic. According to the expert, the average export price for Gazprom will be below $150 per 1,000 cubic meters. In her view, consumers can follow the Chinese scenario by suspending purchases depending on the epidemiological situation.

For his part, Director of Gas & Chemicals Department at Vygon Consulting Dmitry Akishin noted that Gazprom’s large-scale projects, which are expected to be commissioned within the next five years are unlikely to be affected. It is inexpedient to suspend investment in them, since it has already begun, he added.