Fitch says Gazprom's weak European sales likely to continue in 2013
Azerbaijan, Baku, Jan. 14 / Trend A.Badalova/
Russia's Gazprom's sales are likely to fall further in 2013 as weak economic conditions lead to continued low demand in Europe, which is the company's key market for natural gas, Fitch Ratings reported on Monday.
According to the report, Russian gas production data for 2012 indicate that Gazprom's gas sales to Europe and the FSU fell slightly more than was expected.
Fitch Ratings stressed that Europe and the FSU remain key markets for Gazprom, which has a monopoly on the export of Russian natural gas.
"For example, in the second half of 2012 it generated over 76 percent of its revenue from gas sales outside of the Russian Federation, which accounted for only 44 percent of its gas sales by volume," Fitch said.
The agency believes that the drop in European gas volumes and prices was partly caused by litigation by some of its European gas buyers, as well as price renegotiations and compensation payments that followed.
However, agency believes that prices and volumes of European gas consumed under take-or-pay arrangements will not dramatically change in the foreseeable future. According to Fitch, Gazprom will have to continue negotiating further concessions with those European buyers that may have alternative sources of gas supply.
According to the Russian Ministry of Energy, Russian gas sales abroad in 2012, mainly to Europe and the FSU, fell by 8.7 percent to 186 billion cubic metres. Gazprom previously reported a 10 percent drop sales to Europe in the first half of 2012 and a 29 percent volume drop in sales to the FSU countries.
Currently the EU attaches significant importance to the issues of energy supply diversification. The priority project in this respect is the Southern Gas Corridor, which aims at diversifying the routes and sources of energy supply, thereby increasing secure delivery.
Gas to be produced during the second stage of the Azerbaijani Shah Deniz field development is considered as the main source for the Southern Gas Corridor projects.
The consortium of Azerbaijani Shah Deniz gas field development plans to make its selection on the gas supply route to European markets between Nabucco West and the Trans Adriatic Pipeline (TAP). The final decision will be made in 2013.