Gazprom said to see its lowest Europe gas price in 11 years

ELENA MAZNEVA

Bloomberg

Gazprom PJSC, the world’s biggest natural gas exporter, is planning for the lowest price for its fuel in its main European market for more than a decade.

The state-run exporter is drafting its budget for 2016 with preliminary estimates for gas prices outside the former Soviet Union of about $200 per 1,000 cubic meters ($5.45 a million British thermal units), said two people with direct knowledge of the matter who asked not to be identified because the information is private. That compares with the company’s estimate of an average price for the region, which covers Turkey and Europe outside the Baltic States, in 2015 of about $238 per 1,000 cubic meters and $349 last year.

The company’s press office declined to comment on estimates.

Gazprom, which supplies about a third of Europe’s gas and relies on exports of the fuel for 40% of its annual revenue of more than $100 billion, is facing declining prices abroad as most of its contracts are linked to oil with a time lag of six to nine months. Brent crude has lost 16% this year after a 48% drop in 2014. The company is also facing increased competition as the U.S. prepares to export its first LNG from the Gulf Coast.

“Gazprom’s forecasts look reasonable,” Alexei Kokin, an energy analyst at UralSib Financial Corp. in Moscow, said by phone Friday. Russia has the capacity to maintain its market share in Europe given lower prices next year even amid the predicted glut in LNG, he said.

Weaker Ruble

The Moscow-based company is set to this year note its lowest revenue outside the former USSR in a decade in dollar terms. Sales in rubles may rise to a record, reflecting a 2.2% weakening of the Russian currency against the dollar this year, following a 46% drop last year.

Exports to the region are expected to stay stable at about 160 Bcm (5.6 Tcf) in 2016 with revenue in rubles declining but still near the average of the past few years, according to one of the people.

• Most Read
• Most Commented