Gazprom is faced with a sharp decline in revenue from selling gas on foreign markets, according to statistics from the Bank of Russia on the balance of payments for the second quarter, reports finanz.ru.
Between April and June, the gas trade brought Russia only $8.7 billion in foreign currency earnings.
Compared to the first quarter ($14.1 billion), the influx of “gas dollars” has fallen by 38.2% (20% in annual terms) – a two-year low.
In the last decade, Gazprom has only earned less on one occasion – in summer 2016 ($6.5-6.6 billion per quarter), when the gas prices in Europe plummeted to a 12 year low.
For Gazprom this has been a double whammy: not only is it faced with a marked decrease in export volumes, the price has also decreased.
In the first quarter, the volume supplied to Europe dropped by 10%, and although there was growth in the second quarter, the annual figure was 6% in the negative.
Gazprom experienced a collapse in demand in Turkey, which virtually halved its purchase quantity (to 4.4 billion cubic meters in the first quarter), setting a low since 2010.
Consequently, for the first time in history, Russian gas lost to its competitor, Liquefied Natural Gas (LNG): In January 2019, the Turkish operators bought 1.84 billion cubic meters from Gazprom, but 2.34 billion of LNG, and in February, 1.2 billion as opposed to 1.69 billion.
Spot gas prices in Europe began to decline in October last year and were in the region of a multi-year low by April, and the price is yet to recover: At the largest gas trading point, the TTF in the Netherlands, gas with immediate delivery is selling for $120-130 per thousand cubic meters.
Contracts for the coming winter cost significantly more – $200. Nevertheless, Gazprom predicts that the prices will still underperform: the company had budgeted for $230-250.
The price forecast for Gazprom is pessimistic, observes Alfa-Bank analyst Artem Korytsko: In 2019, LNG shipments from the US entered a period of maximum growth in the first wave of projects, and this has already led to a sharp increase in LNG’s share in Europe’s imports – from 10% to 20%.
The uncertainty of gas transit through Ukraine is forcing buyers to prepare themselves by stocking up their underground reservoirs, which will support Gazprom’s sales in the second half of the year, write analysts from Aton. However, gas reserves are at an all-time high, and all the storage capacity will be exhausted by August.
Prices on Gazprom’s contracts follow the spot prices with a lag of 6-9 months, Aton notes: This puts pressure on the company’s financial results, which could underperform by $5 billion in terms of EBITDA ($36.2 billion, -12%).
The shortfall in gas revenue has affected Russia’s balance of trade and payments: the surplus of the former declined by 15% (from $46.8 to $39.7 billion), and that of the latter by nearly two thirds (from $33.7 to $12.1 billion in the second quarter). In June, the balance of currency flows was actually negative, observes chief Alfa-Bank economist Natalia Orlova: the economy spent $1 billion more than it earned.