Russian gas giant Gazprom has increased gas supplies to Europe and Turkey by 12% year on year in the first half of 2017, which has also encouraged the company to boost its gas output forecast to 450 Bcm this year, as it sees growing demand for pipeline gas in the region, CEO Alexei Miller said Friday.
"Gas demand continues rising in 2017. In the first six months, export volumes rose by 12.4%, or by 10.5 Bcm, compared with the same period in 2016," Miller told the company's annual shareholder meeting in Moscow.
Gazprom sees a continued rise in European gas demand after setting a record in gas exports to Europe and Turkey, at 179.3 Bcm last year, with its share of European gas demand reaching a record 33.1% in 2016, and refreshing historical highs in daily exports to the region, he added.
To accomplish that, the company's 55 Bcm/year Nord Stream pipeline carrying gas to Germany via the Baltic Sea, pumped beyond capacity, he said.
"Our gas in Europe sees increasing demand. Gas export pipeline Nord Stream is in demand by more than 100%. On certain days at the last fall/winter season, the flow stood at 111% of its capacity," Miller said.
Last week, the deputy chairman of Gazprom's management committee, Andrey Kruglov, estimated Gazprom's 2017 exports to the region at similar levels to last year, "at least at 178 Bcm or higher."
NATURAL GAS OUTPUT HIKE
With demand for Russian gas increasing, the company raised its forecast for gas exports to Europe and Turkey to 450 Bcm, up 7.3% year on year, Miller said. The new figure also represents a 5% increase from the company's May forecast of 430 Bcm in full-year gas production.
"Given the factual gas production in the first six months of 2017, we forecast full-year production above 450 Bcm, which is above yearly indicators of three preceding years," Miller said.
With the company's resource base shifting north toward the Arctic, Miller noted the increasing production at the Yamal Peninsula's largest gas field, Bovanenkovo, where the company launched new production at the start of the year, raising its peak output to 260 million cu m/d. Gazprom expects to bring the field's production to 115 Bcm/year by 2022, Miller said.
"This single field's capacity will be comparable to the total gas supplies to Europe from the UK, Qatar, and the Netherlands in 2016," he said.
PIPELINE GAS PREFERRED TO LNG
With Europe's growing need for imported gas due to rising demand and falling production, Miller noted increasing interest in Russian pipeline gas, along with a drop in LNG supplies to the region from elsewhere.
LNG supplies to the European market fell by nearly 2%, or more than 1 Bcm, last year, he said.
"Forecasts of LNG replacing gas supplied to Europe by pipeline have not been fulfilled. In the real market conditions, LNG loses. So the European business is ready to take part in pipeline import from Russia in partnership with Gazprom," he said.
The company is partnering with European companies on two new pipelines -- the 55 Bcm/year Nord Stream 2 line to Germany and the 31.5 TurkStream line to Turkey -- to redirect gas flows away from Ukrainian transit after 2019.
Five European companies -- Germany's Uniper and Wintershall, Austria's OMV, France's Engie and Anglo-Dutch Shell -- are partnering with Gazprom on implementing Nord Stream 2, the second underwater pipeline crossing the Baltic Sea, which is set to double the amount of gas pumped via the northern route.
Each company pledged in April to provide up to Eur950 million in funding, or a combined total of half the project's estimated cost of Eur9.5 billion ($10.6 billion), he said, noting the project's efficiency.
"Once we implement Nord Stream 2, we will complete forming the foreign part of the northern gas corridor. It will be the most efficient route, both technically and economically, for Russian gas supplies far abroad," he said.
He estimated gas delivery costs via the northern route and Nord Stream 2 specifically to be half of those via the central corridor via Ukraine.
Meanwhile, Gazprom's LNG sales hit 4.94 Bcm last year, up 4% on the year, having more than doubled sales since 2013, with main volumes going to Japan, India, Taiwan, Mexico, the UAE, and South Korea, Miller said.
CHINA PROJECTS
Gazprom is also stepping up projects for pipeline gas deliveries to Asia, and expects to reach an agreement with China's CNPC on specific timeframes for the launch of the 38 Bcm/year Power of Siberia pipeline, "the core of our strategy in Russia's East and in the Asia-Pacific," Miller said.
"Today, we are completing the discussion of precise timeframes for the supplies via the Eastern route via Power of Siberia according to the contract. The relevant document is expected to be signed in the coming days with our Chinese partners," Miller said.
So far, the timeframes for the pipeline launch stand between May 2019 and May 2021, according to Miller's presentation.
The agreement could be signed during the next meeting of the countries' leaders. China's leader Xi Jinping is expected on an official visit to Russia early next week, when he is due to meet Russian President Vladimir Putin, according to the Kremlin.
Miller also said Gazprom and CNPC intend to agree gas supplies by another route, from Russia's Far East, by the end of this year.
Gazprom also is continuing its cooperation with Chinese partners on underground gas storage in China, power, and promoting the use of LNG as motor fuel, Miller said.
"We have come a long way with our Chinese partners, and we are bounded by the true relationship of long-term strategic partnership," he said.
