August 29, 2019 / 7:21 AM / 21 days ago

Gazprom braces for decline in European gas exports, prices

MOSCOW (Reuters) - Kremlin-controlled energy giant Gazprom on Thursday conceded for the first time that its gas exports to Europe, as well as its prices, will decline in 2019 following record-high volumes last year.

FILE PHOTO: The logo of Russian gas giant Gazprom is seen on a board at the St. Petersburg International Economic Forum (SPIEF), Russia, June 6, 2019. REUTERS/Maxim Shemetov

The decline in volumes and prices augurs badly for Russia and the company, whose sales account for over 5 percent of the country’s $1.6 trillion economy.

Gazprom’s gas exports to Europe plus Turkey, where it generates two-third of its income, exceeded the 200 billion cubic metres (bcm) mark for the first time in 2018.

It had said the 200 bcm level was the new reality for the company. However, its exports have been steadily declining this year due to a number of factors including sluggish demand.

Also, Russian energy sales have become increasingly politicised since 2014 following the annexation of the Crimean peninsula from Ukraine, accusations of meddling in the U.S. presidential election in 2016 and a nerve gas attack in Britain.

Mikhail Malgin, an official at Gazprom’s exporting arm Gazprom Export, told a conference call that the company’s gas exports to Europe are seen declining to 192 bcm, while Gazprom’s average export price would fall by 13% this year, to around $215 per 1,000 cubic metres.

Moscow has piped gas to Europe from its fields in Siberia and northern Russia for more than 50 years. Gazprom plans to start supplying gas to China in December and it has already started to fill the Power of Siberia pipeline which flows to China, with gas.

The company said earlier on Thursday that its second-quarter net income rose by 16% year on year to 300.6 billion roubles ($4.55 billion) thanks to favourable foreign currency rates.

Sales in the three months to June 30 edged down to 1.78 trillion roubles from 1.83 trillion roubles in the same period last year.

Gazprom also said it has raised a 1 billion euro long-term loan from an undisclosed foreign bank.

Reporting by Vladimir Soldatkin and Olesya Astakhova; Editing by David Goodman and Alexandra Hudson

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