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Gazprom
on Hybrid Markets of
Europe
“Energy: Perspectives and Challenges”
Regional Conference
Novi Sad, March 11, 2016
Sergei Komlev Head of Contract Structuring and Price Formation Directorate,
Gazprom Export
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2014 2015 Changes Changes, %
Gazprom JSC 146.6 158.6 12.0 8.2%
Algeria (incl. LNG) 38.9 36.1 -2.8 -7.2%
Qatar 23.7 28.1 4.4 19.0%
Iran 9.2 8.7 -0.5 -6.0%
Lybia (incl. LNG) 4.8 5.7 0.9 19.2%
Deliveries by Major Exporters
2014 2015 Changes Changes, %
Norway* 115.6 125.5 9.9 8.6%
Netherlands 63.1 48.6 -14.2 -23.1%
United Kingdom 41.2 43.9 2,7 6.7%
Bcm
Deliveries by Major Indigenous Producers
2
Deliveries by Major Countries in 2015
Bcm
* Including pipeline and LNG supply of Norway to the European market, but not supply to Asia and America
Source: Bloomberg, IEA, Eurostat, National Statistical Agencies, Estimates by Gazprom Export LLC as of
January 2016
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2014 2015 Changes Changes, %
Qatar 23.7 28.1 4.5 19.0%
Algeria 14.5 12.4 -2.1 -14.3%
Nigeria 6.0 8.0 2.0 33.2%
Norway 2.6 2.9 0.3 10.8%
Trinidad and Tobago 3.6 1.8 -1.8 -49.6%
Peru 1.3 1.5 0.1 -10.6%
Yemen 0.0 0.1 0.1 -
Oman 0.0 0.1 0.1 12.1%
Equatorial Guinea 0.1 0.0 -0.1 -
Total 51.8 54.9 3.1 5.9%
Bcm
Source: Bloomberg, Estimates by Gazprom Export LLC
LNG Deliveries to Europe by Country
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Long Term European Natural Gas Consumption
According to consensus forecast for 2025 and 2035, European gas demand could be 15% and 21% higher compared to 2015
Source: Gazprom Export
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Natural Gas European Demand and Production Gap
Due to the falling indigenous production European demand for additional gas imports may be 110 bcm by 2025 and 160 bcm by 2035
Source: Gazprom Export
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Source: IHS
Supply from Russia Covers Import Requirements of Serbia
0
0,5
1
1,5
2
2,5
3
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013
bcm
Natural Gas Balance
Production Imports
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Source: IHS
Power Generation and Industry are the Major Consumers of Natural Gas in Serbia
30% 36% 36% 36% 36% 30% 40% 29% 37%
39% 41% 45% 47%
48% 44%
40% 40%
40% 40%
40% 53% 50%
36%
33% 31% 37% 38% 13%
12% 11% 11%
11%
11% 11%
5% 14%
21%
17% 16% 18%
15%
13% 14%
13% 13%
13%
13% 20%
2% 7%
6%
12% 12%
26%
1%
0
0,5
1
1,5
2
2,5
3
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010 2011 2012 2013
bcm
Natural Gas Consumption by Sectors
Power- and Heat Generation IndustryResidential, Commercial services Non-energy use
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Source: IEA
IHS Projects Growth in Demand for Natural Gas in Serbia
11%
2000
Coal
Oil
Gas
Hydro
Biofuel 13%
2013
1,5
2
2,5
3
3,5
4
4,5
5
2011 2015 2020 2025 2030 2035 2040
bcm
Source: IHS
+60%
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30,2%
12,6%
11,4% 2,2%
3,0% 1,3%
25,1%
4,4%
8,1% 1,7%
Gazprom - oil- and quasi-oil-indexedNorway 1/3 oil-indexedAlgeria - oil-indexedLibya - oil-indexedQatar - oil-indexedOther - oil-indexedNorway 2/3 hub-indexedQatar - hub-indexedGazprom - hub-indexedOther - hub-indexed
29,5%
12,6%
9,8% 2,1% 3,2%
1,3%
25,3%
4,9%
9,6% 1,6%
Gazprom - oil- and quasi-oil-indexedNorway 1/3 oil-indexedAlgeria - oil-indexedLibya - oil-indexedQatar - oil-indexedOther - oil-indexedNorway 2/3 hub-indexedQatar - hub-indexedGazprom - hub-indexedOther - hub-indexed
Source: IEA, «Gazprom export» LLC assessment
60,6%
39,4%
58,6%
41,4%
2014 2015
Gas-on-Substitute Competition versus Gas-On-Gas Competition in the European ‘Far Abroad’, 2015
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Evolution of 9 months moving average gasoil and TTF Month Ahead prices, 2008-2016
Source: Bloomberg
Correlation coefficient = 0.87 R Square = 0.76
Engle-Granger test for cointegration succeeded
Tight Correlation between European Gas-oil and TTF Prices
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Price Corridor for Natural Gas is Set by Inter-Fuel Competition
Ceiling
Floor
Oil/Oil products parity
Coal parity
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Full Costs of LNG Deliveries from North America to Europe
Source: Bloomberg, Wood Mackenzie
* P = HH * 115% + X, where HH – Henry Hub Forwards, X – total volume of estimated costs, pls., see slide #3
** NBP Forwards
Price Range* of US LNG Deliveries to Europe vs. Forward Prices** of European Hubs
In the medium-term, full costs of LNG deliveries to Europe are significantly higher than the forward prices.
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Full Costs of LNG Deliveries from North America to Asia
Source: Argus, Bloomberg, Wood Mackenzie
Full costs of deliveries of American LNG to Asia are higher than prices under proxy for a standard Asian contract in the medium-term, nevertheless oil price recovery may minimize loses.
* Based on oil forward prices and contract formula P ($/MMBTU) = 14% х Brent Futures + 1.6
Price Range* of US LNG Deliveries to Asia vs. Estimated Prices** of Asian Proxy Contract
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US LNG Exports to Europe and Asia
Source: Bloomberg, Wood Mackenzie
Europe (UK)
Asia (Japan, Korea)
US FOB LNG Price (2018-2020) = $6.0 – $6.5/MMBTU
(115%*HH + $3.0/MMBTU)
Transport Regas. Breakeven NBP
14%JCC+1.6
Margin
$0.69
$2.38
$0.40
$0.40
$7.59
$9.28
$4.3– $5.4
$8.0–$8.5
- $2.7
- $1.0
vs.
vs.
≈
≈
As of Q1 2016, Asian premium is USD 1.7 MMBTU.
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