Gazprom finishes large investment projects

2019 in many respects became indicative for Gazprom. New gas pipelines Power of Siberia and Turkish Stream were put into operation. Gas production on Chayandinsky field began. Gasification of Russia proceeded. Following the results of the year 1880 km more of gas networks were laid to 305 settlements. As of January 1, 2020 the level of gasification of the country reached 70.1%. Successful completion of the large-scale investment program of Gazprom Group in domestic power industry became an important event of the last year.

PAO Gazprom remains the leader in the size of stocks and volumes of production in a rating of the public Russian and foreign companies of the fuel and energy complex (FEC). As of December 31, 2019 in the territory of Russia reserves of hydrocarbons of Gazprom Group of the categories A+B1+C1 made 34.9 trillion CBM of natural gas, 1.6 billion tons of gas condensate and 2 billion tons of oil. Total volume of reserves of hydrocarbons of Gazprom Group of the categories A+B1+C1 corresponds to 254.04 billion barrels in oil equivalent.

A share of the Group in reserves of hydrocarbons of the categories A+B1+C1 of the associated organizations and joint ventures (including a share in stocks of JSC Rusgazalyans) made for December 31, 2019 1.1 trillion CBM of gas, 111.09 million tons of gas condensate and 588.64 million tons of oil that in total makes 12.13 billion barrels in oil equivalent.

According to the DeGolyer and MacNaughton companies, for December 31, 2019 the proved and probable reserves of hydrocarbons of Gazprom Group on the international PRMS standards made 24.4 trillion CBM of natural gas, 1.1 billion tons of gas condensate and 1.4 billion tons of oil. Audit there passed objects which stocks in total made 92.8% of reserves of gas, 95% of condensate and 95.7% of oil of Gazprom Group of the categories A+B1+C1.

Following the results of last year the gain of reserves of hydrocarbons in the territory of Russia on the categories A+B1+C1 as a result of carrying out of prospecting works made 556.69 billion cubic meters of natural gas, 11.72 million tons of gas condensate and 28.98 million tons of oil.

Transportation and storage

In 2019 678.96 billion cubic meters of gas came to the gas transmission system of Gazprom in the territory of Russia. In December, 2019 pipeline supply of the Russian gas to China on gas-main pipeline Power of Siberia began.

Last year creation of the new hi-tech export gas pipeline in the European direction — The Turkish Stream was completed. In January, 2020 commercial deliveries on The Turkish Stream through the Black Sea began.

Gazprom in Russia operates 23 underground gas storages in 27 geological structures: 17 — in the exhausted gas fields, 8 — in water-bearing layers and 2 — in deposits of rock salt. For December 31, 2019 total active capacity on arrangement of the Russian underground gas storages reached 75 billion cubic meters. Potential maximum daily productivity for the beginning of a season of selection increased in comparison with 2018 on 30.8 million cubic meters and made 843.3 million cubic meters. Growth of indicators is connected with commissioning of the Volgograd underground gas storage and also with expansion and reconstruction of the operating gas storages — Kasimovsky and Punginsky. For the beginning of a season of selection 2019/2020 volume of an operational reserve of gas in underground gas storages of Russia made 72.232 billion cubic meters.

In the territory of the former Soviet Union (FSU) Gazprom operates underground gas storages in Belarus (Pribugsky, Osipovichsky and Mozyrsky underground gas storages) and Armenia (Abovyansky station of underground storage of gas) and also uses capacities of Inchukalnsky underground gas storage in Latvia in case of carrying out repair works and emergency situations. By the beginning of a season of selection of 2019/2020 the operational reserve of gas in the countries of the former Soviet Union made 1.18 billion cubic meters.

Gazprom actively uses capacities of gas storages in the European foreign countries: in Austria (Haidach), Germany (Yemgum, Rehden, Catharina, and Ettsel), Serbia (Banatski Dvor), the Czech Republic (Damborzhitsa).

By the beginning of a season of selection 2019/2020 in underground gas storages of the European foreign countries Gazprom under contracts of JSC Gazprom Export created own capacities of about 8.5 billion cubic meters of active gas. Besides, commercial contracts for the period up to March 31, 2021 have been signed for storage of 3 billion cubic meters of gas in underground gas storages of Austria, Hungary and Slovakia. As of December 31, 2019 the volume of operational reserve of 11.7 billion cubic meters was provided in the European underground gas storages.

Domestic market

In 2019 general consumption of gas in Russia made 481 billion cubic meters that is 2.5% below than the level of 2018. A share of natural gas in power balance of Russia last year made about 54%. Last year Gazprom Group realized to consumers of the Russian Federation 235.8 billion cubic meters of gas.

There were 802.8 thousand km of networks of gas distribution in property and on service of the affiliated and dependent gas-distributing organizations (GRO) of the Group in the territory of Russia as of December 31, 2019. Last year transportation volume on gas-distributing system of affiliated and dependent GRO of Gazprom Group made 232.6 billion cubic meters of natural gas.

Gazprom Group realizes an important national objective of gasification of the Russian regions. Conditions for connection of tens of thousands of consumers to gas reception are created annually.
66 subjects of Federation for whom investments of 34.3 billion rubles were allocated participated in the approved Program of gasification for 2019.

Last year building of 124 objects of gas supply 1.9 thousand km long was completed. Conditions for gasification of 68.31 thousand households and apartments, 179 boiler rooms in 305 settlements are created. Level of gasification in 2019 in comparison with 2018 grew on 1.5 items and made in general across Russia 70.1%, in the cities and settlements of city type — 73%, in rural areas – 61.8%.
The Program of gasification of regions of the Russian Federation for 2020 included 66 regions, investments of PAO Gazprom of 39.26 billion rubles are provided.

Processing and power industry

In 2019 Gazprom Group without raw materials supplied by the customer processed 31.47 billion cubic meters of natural and associated gas that is on 1.3% more than the level of 2018. Volumes of processing of gas of Karachaganaksky field (Kazakhstan) as raw materials supplied by the customer on Orenburg gas processing plant made 9.11 billion cubic meters.

Besides, Gazprom Group last year processed 67.13 million tons of liquid hydrocarbon raw materials (oil, gas condensate and fuel oil).

Following the results of 2019 the Group made 148 billion kilowatt-hours of electric and 122.38 million gigacalories of thermal energy in the territory of Russia.

Successful completion of the large-scale investment program of Gazprom Group in domestic power industry became an important event of the last year. Since 2007 the companies of Gazprom Energoholding constructed about 9 GW of the modern generating capacities, including the second power unit of the Grozny thermal power plant entered in the summer of 2019. Besides, construction of the first power plant of Gazprom Energoholding abroad began in a Serbian town Panchevo.

Gas-engine infrastructure

Expansion of use of natural gas as motor fuel is one of priority tasks of Gazprom Group. As of December 31, 2019 in the territory of the Russian Federation in 67 regions 447 objects of gas- engine infrastructure were situated. On balance of the affiliated organizations of Gazprom Group and JSC Gazprom Gas Motor Fuel are 299 acting (carrying out commercial holiday of gas) automobile gas-filling compressor stations with a productivity more than 2.2 billion cubic meters a year.

Together with Federal Highway Agency the General scheme of placement of objects of gas-filling infrastructure on highways of federal value assuming construction till 2030 of a basic network from 181 objects and creation of so-called «gas engine corridors» on the key operating and perspective highways of Russia is developed.

In a segment of use of natural gas as motor fuel Gazprom Group is presented in the market of Europe via 100% Gazprom subsidiary NGV Europe which owned as of December 31, 2019 objects of gas engine infrastructure in Germany and the Czech Republic (64 automobile gas-filling compressor stations), in Poland (1 automobile gas-filling compressor station). Besides, the NIS company entering into Gazprom Oil Group realizes compressed natural gas via three own automobile gas-filling compressor stations in the market of Serbia.

There are 39 automobile gas-filling compressor stations on balance of the affiliated organizations of Gazprom Group in the territory of the Former Soviet Union.

The World market

Growth rates of the world economy (real GDP at par of purchasing power) in 2019, by estimates of the Organization for Economic Cooperation and Development (OECD), were slowed down to 2.9% (in comparison with 3.5% in 2018). Prolonged trade disputes between the USA and the People’s Republic of China, uncertainty concerning an exit of Great Britain from the EU and the general geopolitical intensity had negative impact on dynamics. The greatest contribution to the world growth last year was made by China and India with growth rates of 6.1% and 4.9% respectively.

Against delay of rates of economic growth an average annual price of oil of the Brent brand last year decreased more than on 10%, having made 64.2 dollars/barrel that had negative impact on revenue and profit of Gazprom Group.

Last year the tendency of reduction of production of natural gas in the European countries proceeded. Thus the volume of its consumption in the European foreign countries last year increased on 11.1 billion cubic meters or 2%, having made 560 billion cubic meters. The weather factor thus had considerable negative impact on consumption: the weather index of Europe was lower than both climatic norm, and level of 2018 (92.6% against 97.1% in 2018) at the expense of warm weather in February — March and October — December, 2019. Consumption of gas in the sector of electricity generation increased on 6.7 billion cubic meters, with a growth in the industry (+1.3 billion cubic meters) and household sector (+1.9 billion cubic meters). The main contribution to increase in demand for natural gas in power industry was made by decrease in volumes of nuclear, coal and hydro generation. Electricity generation share in the structure of consumption of gas increased on 0.6 %: from 30.6% in 2018 to 31.2% in 2019.

Gas import growth (+34.8 billion cubic meters or +10.7%), first of all due to growth of import supply of liquefied natural gas (+47.3 billion cubic meters or +69.6%) at reduction of pipeline deliveries (−12.5 billion cubic meters or −4.8%) became an essential factor of balance of supply and demand. Own production in the countries of Europe thus was reduced on 16.2 billion cubic meters or 6.4%, thereof more than 45% were a share of Norway and nearly 30% — of the Netherlands. The volume of realization of gas by PAO Gazprom under the contracts of JSC Gazprom Export to the European foreign countries in 2019 made 191.4 billion cubic meters. Besides, last year the company carried out transactions of raw (gas) repo * concerning 7.6 billion cubic meters of gas pumped in the European underground gas storages. Thus, in total 199 billion cubic meters of gas were delivered to the European foreign countries under the contracts of JSC Gazprom Export. Besides, in 2019 the Group realized 38.7 billion cubic meters of gas to the countries of the former Soviet Union.

China is one of the most dynamically developing gas markets of the world. Under conditions of gas consumption growth Chinese companies actively increase both own production and gas import. According to the profile state departments of the People’s Republic of China, in 2019 the volume of consumption of gas in China made 307 billion cubic meters that on 9.4% or nearly on 27 billion cubic meters more than the indicator of 2018. Significant increase in consumption was caused by increase in demand for gas in the industry, electric generation and housing and communal services, including thanks to continuation of policy of the government of the country on increase of a share of gas in energy balance.

Essential role in a covering of demand for gas in China is played by import. In 2019 China imported over 133 billion cubic meters of gas that is on 8 billion cubic meters more than the results of 2018. Today the significant role in ensuring import of gas to the country is played by liquefied natural gas. At the same time it is expected that in the process of export growth of the Russian gas on Power of Siberia, pipeline deliveries on which began at the end of the last year, a share of pipeline import in the Chinese market will increase.

One of the priorities of gas business of Gazprom Group is stage-by-stage realization of the approved strategy for production, sea transportation and marketing of liquefied natural gas. In 2019 the Group carried out deliveries to contractors mainly to Asia-Pacific countries (69% of deliveries). Last year volumes of realization of large-capacity liquefied natural gas from trade portfolio of Gazprom Group on the markets of foreign countries made 3.78 million tons or 5.04 billion cubic meters.

Growth of the world economy stimulates increase in consumption of energy. Primary energy consumption in the world in 2019 grew on 2.5% and exceeded 14.5 billion tons of oil equivalent. Further, it agrees to the main forecasts, the world consumption of energy will steadily increase and growth can exceed 20% by 2040 in comparison with the level of 2019. Thus two thirds of this gain will be provided with the countries of the Asian region.

A need for large volume of energy will turn the Asian region into the largest importer of energy resources in the world: by 2040 the countries of Asia will increase import of oil by a third, coal — more than for 50%, and natural gas — by 2.5 times.

An important factor of formation of the world energy balance is increase of attention to environmental issues. During the period till 2040 consumption of natural gas and renewable energy sources will grow most dynamically. More than 80% of total amount of the world gain of consumption of energy account for these energy carriers. If in 2019 nearly a third of the world energy consumption accounted for oil, and gas took only the third place (about 23%), by 2040 a share of natural gas in the world fuel and energy balance will grow to 25% and it will come to the second place, having outstripped coal. Till 2040 gas will be the leader in the volume of a universal gain of energy consumption in absolute measures. According to the forecasts, the world consumption of gas will exceed the level of 5.5 trillion CBM by 2040. It opens brilliant prospects before Gazprom.