Gazprom pipelines and export capacity

Газопроводы Газпрома и экспортные мощности

Gas pipelines of West Siberia

Газопроводы Западной Сибири

Export flows of Gazprom

Экспортные потоки

Spot, Gazprom, Brent

Цены на нефть и газ

End-use price of gas

Russia and USA

Daily gas production

Суточная добыча


Important Changes in Russian Gas Business Environment


Economics of Russian-Ukrainian Gas Conflict: Who won the war?  - Updated

RosUkrEnergo may be the real winner. Free market in Russia is the loser. We made these estimations before the the text of Gazprom-NAK Naftogaz agreement was published.

The "gas war" is over. Statements of Russian and Ukrainian parties are not quite clear yet. The only clear numbers are the export price of $230/mcm (mcm = 1000 m3) of Gazprom and the average import price of $95/mcm of Ukraine. According to our calculations, this combination works only if Gazprom exports to Ukraine a maximum of 6.5 bcm of gas per year. Turkmenistan is to supply 40.0 bcm and 10.0 bcm is to be delivered from Uzbekistan and Kazakhstan. Table 1 below summarizes gains and losses of involved parties, except for RosukrEnergo.

Table 1. Gains and Losses of the Gas Conflict: Preliminary Estimations

 
 Unit
 2005
 2006

 NAK Naftogaz of Ukraine:

     
 Average price of imported gas
 $/mcm 
63.6
95.0
 Volume of imported gas
 bcm 
58.0
56.5
 Cost of imported gas
 $ billion 
-3.7
-5.4
 Ukrainian transit tariff 
 $/mcm/100km 
1.09
1.60
 Transit revenue
 $ billion 
1.6
2.3
 Balance
 $ billion 
-2.1
-3.1
 Change from 2005:
  $ billion 
 -   
-1.0
 Change after payment from RosUkrEnergo
  $ billion 
 -   
 ?   

 Gazprom:

 

 

 

 Price of exported gas
 $/mcm 
50.0
 230.0
 Sales to Ukraine
bcm
21.0
6.5
 Sales revenue
 $ billion 
1.1
1.5
 Sales revenue net of export duties
 $ billion 
0.7
1.0
 Transit volume of gas from Central Asia
bcm
37.0
50.0
 Transit revenue: 
 $ billion
0.3
0.7
 Ukrainian transit cost
 $ billion 
-1.6
-2.3
 Balance
 $ billion 
0.2
0.3
 Change from 2005:
  $ billion 
 -   
0.0
 Gas available for additional sales
bcm
 -   
14.5
 Gazprom price of for RosUkrEnergo
 $/mcm 
 -   
93.0
 Sales revenue net of export duties
 $ billion 
 -   
0.9
 Change from 2005:
 $ billion 
 -   
0.9

 Russia:

 

 

 

 Export duties
 $ billion
0.3
0.9
 Change from 2005:
  $ billion 
 -   
0.5

NAK Nafotagaz of Ukraine loses about one billion dollars a year before getting its share from RosUkrEnergo. The Ukrainian firm decided not to introduce storage capacity reservation fee for Gazprom.

Gazprom breaks even in terms of transit relations with Ukraine, but saves 14.5 bcm for additional exports. Apparently, the additional exports go through RosUkrEnergo, though having a broker for exports of Russian gas does not make sense. It does make a lot of sense in case of Central Asian gas because transit sales of foreign broker are exempt from export duties.

Gas price at the European border has nothing to do with the price of gas sold by Gazprom to RosUkrEnergo. According to Gazprom report for Q2-2005, in the first half of 2005, Gazprom was selling gas to RosUkrEnergo in Ukraine at $93/mcm, while the average European price was $174.4/mcm. The broker then exported gas to Europe. Half of the profit of RosUkrEnergo is reported in the books of Gazprom and another half elsewhere. We are unfamiliar with the operating expenses of RosUkrEnergo. Apparently, the Swiss broker plans to increase re-exports to Europe in 2006 while buying more gas from Gazprom at a discount.

In our view, a 100% daughter company of Gazprom, like Gazprom UK or ZMB GmbH, could be a better foreign intermediary for Central Asian gas, especially if the transactions were set on non-profit basis and all profits went to the shareholders of Gazprom. RosUkrEnergo makes profits for other parties and transfers them to Switzerland.

Russian state is a winner with an additional tax collection of $0.5 billion a year.

Final gains of Gazprom and RosUkrEnergo are unclear, though it looks like the Swiss broker gets a major boost right before the announced IPO. This is a nice coincidence.

The Russian free market is a clear loser. Several independent gas producers in Russia can easily beat the $230 price of Gazprom. However, nobody dares even to think of making an offer to Ukraine. Selling gas to Russian consumers at state-regulated price of $30-$45/mcm is more safe.

Mikhail Korchemkin

January 4, 2006

 

Previous publications on Russian-Ukrainian gas dispute:

Russian-Ukrainian Gas Conflict: Lack of Free Market in Russia

Russian-Ukrainian Gas Conflict: Financial Effects of the Russian Side - 2

Russian-Ukrainian Gas Conflict: Financial Effects of the Russian Side

Brief history of Soviet and Russian gas pipeline policy

Clarifying the math of Ukrainian transit tariff


Last modified: 12/07/14                    East European Gas Analysis 2006-2014                                           Email: info@eegas.com
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