The European gas market is under pressure from several factors, says a leading expert of National Energy Security Fund, Lecturer of the Financial University under the Government of the Russian Federation Stanislav Mitrahovich.
Coronaviruses intensified the problem in the European gas market
Spot prices for gas in the EU fell below 80 dollars per thousand cubic meters. It means, that the profitability of export deliveries of gas has become lower than the yield of the Russian domestic market. Today, in the western part of Russia, namely, in the Leningrad and Smolensk regions, the price of gas is 59 dollars per thousand cubic meters.
As a result, after the payment of export duty 30 per cent of the company "Gazprom", which is Russia's monopoly on the supply of pipeline gas, It receives less money, than he earns at home. Naturally, a blow to the company's position and prospects of its projects - in particular, "Northern stream 2".
The reason for this situation is the very mild winter in Europe, growing LNG supplies to the European market and going because of that price war. Respectively, "Gazprom" has lowered gas prices for some countries, who buy his raw materials under long-term contracts.
"Now in the energy market are just two of the war - Oil and Gas, and the gas war has begun even earlier. First, gas prices have fallen to 100 dollars per thousand cubic meters, that very few, then reached 90 dollars, and now to 80 dollars or even lower ", – states Mitrakhovich.
According to the expert, All this happened long before the collapse of the OPEC deal +, that the collapse in oil prices, not to mention the effects of the pandemic coronavirus, which is actively developed in recent weeks.
"Prices in the range 90 dollars have been already in February. Of course, this is a very low price, that jeopardize the business of almost all suppliers of gas to the European region. However, logic there today is this - "in the long term prices should be changed". Because of this, vendors do not go away from Europe and try due to the price war to change the alignment, which was formed, and to strengthen its own position ", – summarizes Mitrakhovich.
Mitrakhovich believes, that the coronavirus pandemic superimposed on these factors worsened the situation on the gas market of the European Union.
"Players today think, that the period of low prices will be held, and that during this time is necessary due to the gas and financial reserves to maintain its position in the European market. That is applied to the negative economic situation and only aggravates the situation with the prices ", – concludes Mitrakhovich.
oil problems intersect with gas problems
According to Stanislav Pavlovich, coronavirus was added and the problem with the oil, which leads to, that gas prices will fall not only on spot transactions, but also on long-term contracts, "Gazprom".
They are tied to oil prices with a lag 6-9 months.
"Treat this as a need for a very difficult situation. I do not think, that the EU may give up the gas, since such energoperehod physically take many years, not to mention the other factors in the European energy sector. Therefore, at some point, prices have to go up, otherwise it begins to die coal consumption in the European Union ", states Mitrakhovich.
Gas main competitor in the global and European economy is coal. Its consumption is high even in Germany, not to mention countries such, Poland and the Czech Republic, whose economy continues to depend on coal.
Therefore, the gas is the future of the European energy sector, and it is understood by all interested players. This circumstance is caused by the current price war, because the main interest is the struggle for the redistribution of gas supplies to the EU market.
"The issue here is the same, as well as in the oil market - who will come first from a distance. Russia, Saudi Arabia, Americans, poor African countries like Algeria,, Nigeria etc. By evaluating the gas sphere should be treated the same way and look at, Do not be closed LNG plants in the US ", – summarizes Mitrakhovich.
We have heard about the problems of the US shale oil, but because LNG is much less commercially viable resource. Most energy companies are electives shale gas to oil in the hope, that production will allow to earn in the future. Therefore, the crisis in the oil industry was reflected in the gas.
"Now due to financial instruments, all these production hedged, but if low prices stand for a year, that such insurance will not help, and she will go down mining ", – concludes Mitrakhovich.
Mitrakhovich considers, that when we see news about the, that some plants will stop working on LNG, this will be a sign, that gas prices have reached the bottom and are ready to push off from it.
"Our state is here to support the manufacturers tax breaks for example those preferences, which were presented to the company "Novatek". It is theoretically possible to remove or reduce export duty, to help to "Gazprom" to win the fight on the market. Naturally, the cost of this will be the loss of the federal budget ", – states Mitrakhovich.
obviously, that the tactics of Russia in the EU gas market, As in 2015 year, will hold for a 30-40 percent of European consumption volumes.
Dmitry Sikorski
