Russian state-owned Gazprom said Monday that its exports to Europe in October increased by 41.4% year on year to 14.7 Bcm, in line with expectations that European consumers would ramp up purchases in the second half of the year, as the impact of low oil prices hits gas prices under long-term contracts.
The October growth follows on from increases of 22.4% in July, 23.1% in August and 24.2% in September, Gazprom said.
In September, Gazprom raised estimates for its exports to Europe in 2015 to 158 Bcm on the back of a strong second quarter. Initially Gazprom expected to ship 152-153 Bcm to Europe this year based on weaker demand in the first quarter, when purchases in those markets fell 20% year-on-year amid expectations of future lower prices for Russian gas under long-term contracts.
Gazprom's long-term contracts with European consumers typically include a 6-9 month lag in oil prices built into the pricing mechanism, making gas supplied under these contracts significantly cheaper in H2 2015.
Gazprom officials have estimated that its gas price will average Eur195.9/1,000 cu m in the upcoming winter season. This is the average price for all deliveries, including under long-term, oil-indexed contracts and spot markets.
UKRAINE SUPPLIES
Gazprom also said Monday that exports to Ukraine have declined threefold from November 1, echoing comments made by Ukrainian officials last week.
"From the beginning of November Ukraine reduced consumption of Russian gas almost threefold, due to Naftogaz Ukrayiny's financial problems. Remaining prepaid gas is sufficient for only five days," Gazprom said.
Last week Naftogaz Ukrayiny head Andriy Kobolev said Ukraine would greatly reduce its Russian gas imports starting on November 1 because European gas is currently cheaper.
Ukraine was buying Russian gas at about $227/1,000 cu m in October, but insisted the price needs to come down in order to be attractive and that future purchases this winter would depend on prices for Russian gas.
Kobolev also said last week that Ukraine may do without Russian gas imports entirely in 2016, relying on European imports. During export interruptions for six months in 2014 and for three months in 2015 Ukraine replaced Russian volumes with supplies from Europe.
