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Gazprom without Europe and the oil price ceiling

Salikhov Marcel R. President, Principal Director on Economic Studies, Head of the Economic Department

Marcel Salikhov, President of the Institute for Energy and Finance, gave an interview to BCS Express on the current situation in the oil and gas sector.

— How has the situation on the gas market changed since February? How much Russian gas did Europe receive before and now?

- Now gas supplies to Europe from Russia are at very low levels. The Federal Customs Service does not publish statistics, and we only have European data on gas flows. They show that Russian gas exports amounted to 3.7 bcm in July. m is three times less than it was a year ago. And this creates problems, because Russia provided about 40% of Europe's consumption and was the largest supplier. And now we are seeing gas prices above $3,000 per thousand cubic meters. These are space prices, very, very expensive.

But the problems at the European market began before February 24. Until 2020, a thousand cubic meters of gas cost $300 on average in the European market. The jump has happened since last fall. On average, last winter the price level was around $1,000, now it's $3,000. Of course, this is a big problem. We have some idea that Europe will freeze and agree to something (to a compromise with Russia - ed.). But European politicians and experts have no plans to return Russian gas. Even those of them who are in opposition to the current authorities, even in Germany.

- And what will the Europeans do when winter comes?

— Gas deliveries from Russia to Europe have decreased by 3-4 times. The substitution was mainly due to liquefied natural gas. That is, LNG imports have grown significantly. If on average last year it was 5-6 million tons per month, then in recent months it has already been 10-11 million tons. The global LNG is being reconfigured. Previously, all major LNG suppliers tended to target the Asian market due to high prices. What could not be sold in Asia was supplied to Europe. Now this model has changed.

The level of occupancy of European underground gas storage facilities is quite high - at the end of August, almost 80%. Although they had such a target level (80%) by October 1. Most likely, by the beginning of the heating season it will be 90% or slightly higher. The average total capacity of European UGS facilities is about 100 bcm. m. But Europe cannot live through the winter only on UGS facilities, this will not be enough.

I think that in a realistic scenario, gas prices will remain high. $3000-4000 per thousand cubic meters, or even more.

— There are forecasts about $5,000. What level is acceptable for Europe?

Everyone competes to see who can make the most radical prediction. I think that the average level will be $2,000 per thousand cubic meters. This is enough to get Europe through this winter. Because UGS facilities are still full, and LNG will continue to flow - Asia, in fact, resells free volumes.

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