Belarus costs much for Gazprom. Prices will surely grow
- 6.11.2008, 8:24
As Europe reduces volume of purchases of the Russian gas, Gazprom is going to compensate shortfall in income with selling gas to Belarus at USD 200 per 1,000 cubic meters, Russian Kommersant daily writes.
Russian gas export reduced by 8.3 per cent in October YoY. The main customers – Germany, Italy, Turkey – declined purchase volumes due to hike in prices up to USD 460–520 per 1,000 cubic meters since October 1. Purchase volume will most likely continue to fall in November and December.
The Central Dispatch Center (CDC) of the fuel and energy complex of the Ministry Of Energy issued key rates of the energy complex for nine months 2008. The CDC materials say that gas export fell by 8.3 per cent in October thus reaching 12.6 billion cubic meters. Gazprom Export company, a monopolist exporter of natural gas, refused to comment on these data “unless monthly supplies protocols are issued after the 20th day of the month”.
At the same time, a Gazprom top manager told to the newspaper that decline in demand was caused by gas prices hike since October 1 as gas prices are linked to oil basket with a delay of 6–9 months. “Under long-term contracts, Russian gas is the most expensive gas in Europe today. All main consumers buy less gas and spotbuy the rest,” the manager explained. He meant here short-term exchange auctions, where prices are 30 percent lower than ones provided by long-term contracts, Maksim Shein from Brokerkreditservis company says. Italy, for example, increased Algerian and Libyan gas purchases. “As in last spring, LNG is now cheaper that Russian natural gas,” a source from Gazprom group said. “If it isn’t cold in December, supplies will continue to fall in November–December.”
Reduction of gas deliveries in volume terms will reduce the planned income of Gazprom, but still preserve it on the highest level – USD 75–77 billion. Deputy director-general of Gazprom Exports Sergei Chelpanov has recently said this. For ten months 2008, gas exports from Russia has really increased by 14.3 billion cubic meters and amounted to 134.5 billion cubic meters YoY, according to the CDC of the fuel and energy complex.
The main income losses are expected in 2009 due to drop in gas prices up to USD 360–400 in Western Europe. However Gazprom counts on compensating the lost income with selling of 22 billion cubic meters of gas to Belarus and 55 billion cubic meters to Ukraine at USD 200 and USD 250–400 per 1,000 cubic meters respectively.
The monopoly will suffer significant losses if the Russian authorities oblige to transfer exporting contracts to Russian ruble from January 1, 2009. Russian President Dmitry Medvedev said yesterday in his annual address to the Federal Assembly it was possible. He noted Russia should begin the conversion to settlements in rubles first of all for natural gas and oil. Earlier, Prime Minister Vladimir Putin said that Belarus could be the first country to pay for oil and gas in Russian ruble from January 1, 2009.
As a Gazprom manager told to Kommersant, it will be difficult to converse all settlements with the CIS countries in rubles from January 1, as contracts with all countries except for Ukraine, are pegged to oil basket and quoted at dollars. Gas oil and fuel oil need to be sold for Russian rubles in the frames of changing the world market conditions. In other case, a simple conversion of contracts from dollars to rubles can lead to income downfall while the tendency of ruble falling will preserve, Maksim Shein explains. However, Gazprom doesn’t fear transition to rubles and said yesterday sales in rubles will have a positive effect on Gazprom’s financial performances.