Gazprom is expanding price indexation in its portfolio to include more stable, longer-term forward products, Gazprom Export CEO Elena Burmistrova said in an interview with the Russian state-owned company’s corporate magazine published Oct. 25.

“In our portfolio, the share of contracts linked to spot prices and forward quotations on European trading floors has also increased significantly in recent years. At the same time, to ensure predictable financial flows, we are expanding the use of price indexation to more stable forward products,” Burmistrova said.
She added that these include products with longer timeframes, including quarters and years.

In recent months European gas prices have reached record highs, intensifying concerns over winter gas supply.

The TTF day-ahead price hit a record high of Eur116.10/MWh ($39.51/MMBtu) on Oct. 5, according to S&P Global Platts price assessments. Platts assessed the TTF day-ahead price at Eur87.025/MWh ($29.676/MMBtu) on Oct. 22.

Burmistrova said that Gazprom has adjusted its forecast for average prices in 2021 to $270/1,000 cu m ($9.55/MMBtu).

She pointed to high uptake of gas from storage in the EU in winter 2020-21 due to cold weather, and a late start to the injection season as factors underpinning high prices.

“Europe will enter the autumn-winter period with a shortage of gas in storage facilities. This situation will certainly stimulate demand and affect prices,” Burmistrova said.

She did not provide a forecast for total volumes sold via its Electronic Sales Platform this year, but said that as of September around 7.4 Bcm had been sold with delivery this year.

“This trading tool, which works in addition to our long-term contracts is designed to respond flexibly to changes in market conditions… the ETP has, as in previous years, proved its reliability and shown itself to be a flexible tool for additional gas sales,” she said.

Price volatility — with a significant fall in prices in 2020, and a sharp increase this year — is the result of external factors and not the structure of the gas market itself, Burmistrova said.

She pointed to factors including the unevenness of the pandemic recovery in different countries, and large flows of LNG to the Asian market. She said that the development of the global LNG industry would largely determine the state of the European gas market.

Burmistrova added that she expects Russian gas to remain competitive even if the EU’s Carbon Border Adjustment Mechanism (CBAM) is introduced on the gas sector, because Gazprom is taking steps to reduce its emissions.

Export volumes

Gazprom is still forecasting that it will supply 183 Bcm of gas to Europe and Turkey in 2021. Burmistrova did not give a forecast for 2022 supply volumes, but said that it would mainly depend on the weather and the situation on the LNG market.

2021 forecasts include supply of an estimated 24-25 Bcm to Turkey, Burmistrova said.

“Despite all the difficulties caused by the coronavirus pandemic, the volume of our gas supplies to this country [Turkey] has remained practically at the level of 2019. And in the first nine months of 2021, we have increased supplies to Turkey by 138.3% compared to last year,” she said.

Gazprom expects LNG sales to be over 8 million mt in 2021. Gazprom is expanding its LNG portfolio, which Burmistrova said has doubled over the past few years.

“We were able to ensure such a significant increase in supplies both by increasing sales volumes under long-term contracts, and due to a significant increase in trading operations,” she said.

Gazprom is looking to increase its customer and supplier base beyond its current key markets in the Asia-Pacific region to Southeast Asia, Africa and the Middle East, she said.

China supplies

Gazprom supplied 7.1Bcm to China via the Power of Siberia pipeline in the first nine months of 2021.

“Deliveries to China via the Eastern route are currently proceeding according to the agreed terms, even slightly above our daily obligations… A gradual increase in the capacity of the Power of Siberia gas pipeline is underway to ensure export supplies to China of up to 38Bcm/year,”

She said that Gazprom does not currently plan to take part in infrastructure projects in China, when asked if the company is involved in China’s underground gas storage network.

On Oct. 22 Gazprom said that it had agreed the route of the Soyuz Vostok pipeline, which will ship gas through Mongolia to China, with the Mongolian government.

“The Mongolian government has already taken steps on state support for the project, and reserved sits for gas pipeline facilities,” Gazprom said in a statement posted on its official Telegram channel Oct. 22.
Source: Platts