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Lower gas prices to drive demand growth: Gazprom

by Erika Green

Russian natural gas giant Gazprom said the Covid-19 pandemic hasn’t had a major impact on the gas market, and that global demand is set to grow, Kallanish Energy reports.

According to Gazprom’s head of finance, Alexander Ivannikov, softer gas prices will incentivize gas consumption both in Europe and worldwide. They will also limit liquefied natural gas (LNG) supply and put pressure on financial investment decision approval for planned projects, he said.

Speaking at the company’s 2019 financial results presentation, Ivannikov noted that lower crude oil production in the U.S. is expected to reduce associated gas production.

“Falling oil prices will put pressure on LNG prices under long-term contracts, which is set to make natural gas more competitive against other energy sources, and boost its consumption,” he predicted.

The executive said the industry is facing “the most difficult situation over a long period of time,” with global oil and gas players been severely affected by a “unique combination of headwinds.”

However, he defended Gazprom maintains its strong position due to a number of long-term factors and response measures recently implemented. Among these, Ivannikov highlighted the advantage of low production cash cost, leadership in the European gas market and market diversification with pipeline supplies to China.

For 2020, Gazprom announced a 20% cut in its gas business opex and group’s capex. Under its forecast outlook, the company is planning 166.6 billion cubic meters (Bcm) of exports to Europe at an average price of $133 per thousand cubic meters (Mcm).

Last year, the company’s gas export price to Europe averaged $211/Mcm, which would suggest a 40% decline in gas prices this year.  (See related story)

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