Gazprom can increase exports, as domestic storage requirements fulfilled

Oil&Gas Materials 18 November 2021 17:45 (UTC +04:00)

BAKU, Azerbaijan, Nov.18

By Leman Zeynalova – Trend:

Russian Gazprom can increase exports, as domestic storage requirements have been fulfilled, Trend reports with reference to Fitch Ratings.

“During January-October 2021, Gazprom's production increased 15.8 percent yoy and exports 10.4 percent yoy. The company guides towards 183 bcm natural gas exports to Europe (including Turkey), although there is a potential for higher volumes, given that domestic storage requirements were fulfilled and that Gazprom can now increase exports. The vast majority of Gazprom's European export volumes were subject to take-or-pay clauses,” said the rating agency.

Fitch analysts estimate Gazprom's average realized non-FSU (former Soviet Union) gas price at USD295/mcm (USD8.3/mcf) in 2021, which is below European spot levels.

“We assume that around a third of Gazprom's 2021 non-FSU export volumes will be sold at spot or month-ahead prices, around 20 percent to be oil-indexed, while the rest will be a mix of gas forwards-linked contracts ranging from a quarter to a year ahead. Oil-indexed contracts in Gazprom's portfolio will be supported by growing sales to China,” reads the latest report released by Fitch.

The rating agency forecasts Gazprom to generate negative free cash flow (FCF) each year in 2022-2024, due to a large capex program, increased dividend pay-out ratio and rising costs on top of a moderation in oil-and-gas price assumptions towards more conservative long-term levels.

“Nevertheless, we expect Gazprom's leverage to remain within our sensitivities for the SCP if the company adheres to its financial targets in its capital-allocation decisions,” the report says.


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