|Bid||232.00 x 210000|
|Ask||0.00 x 1459000|
|Day's range||231.61 - 233.77|
|52-week range||148.83 - 272.68|
|Beta (5Y monthly)||0.19|
|PE ratio (TTM)||3.47|
|Forward dividend & yield||16.61 (7.08%)|
|Ex-dividend date||17 Jul 2019|
|1y target est||N/A|
Does the February share price for Public Joint Stock Company Gazprom (MCX:GAZP) reflect what it's really worth? Today...
(Bloomberg) -- President Donald Trump’s top energy official said he’s confident that Russia won’t be able to complete the Nord Stream 2 gas pipeline in the Baltic Sea -- and signaled that the U.S. will press forward with its opposition to the project.Asked about Russian efforts to circumvent U.S. sanctions on the pipeline by completing it on its own, U.S. Energy Secretary Dan Brouillette said “they can’t” -- and dismissed claims that project owner Gazprom PJSC will face only a short delay.“It’s going to be a very long delay, because Russia doesn’t have the technology,” Brouillette said in an interview at the Munich Security Conference on Saturday. “If they develop it, we’ll see what they do. But I don’t think it’s as easy as saying, well, we’re almost there, we’re just going to finish it.”The pipeline, which would pump as much as 55 billion cubic meters of natural gas annually from fields in Siberia directly to Germany, has become a focus for geopolitical tensions across the Atlantic. Trump has assailed Germany for giving “billions” to Russia for gas while it benefits from U.S. protection.Nord Stream 2’s owners had invested 5.8 billion euros ($6.3 billion) in the project by May 2019, according to company documents.Why World Frets About Russia’s Nord Stream 2 Pipeline: QuickTakeU.S. sanctions in December forced Switzerland’s Allseas Group SA, which was laying the sub-sea pipes, to abandon work, throwing the project into disarray. The U.S. has said Europe should cut its reliance on Russia for gas and instead buy cargoes of the fuel in its liquid form from the U.S.“It’s distressing to Americans that, you know, Germany in particular and others in Europe would rely upon the Russians to such a great degree,” Brouillette said, adding that he is unaware of additional sanctions should Russia move to defy the U.S.Even as he spoke, signs emerged that Gazprom’s attempts at completion may be underway. A Russian pipe-laying vessel, the Akademik Cherskiy, left the port where it had been stationed in Nakhodka on Russia’s Pacific coast last Sunday. Russian Energy Minister Alexander Novak last year mentioned that vessel as an option to complete the pipeline in Denmark’s waters. The vessel is now expected to arrive in Singapore on Feb. 22, according to ship-tracking data on Bloomberg.While Gazprom has said it’s looking at options to complete the pipeline, it hasn’t given any details on where it will find the ship to do the work. One of the pipeline’s financial backers, Austrian gas and oil company OMV AG, has predicted that the Russians will follow through.“From my point of view, they will find a solution,” Rainer Seele, OMV’s chief executive officer, told Bloomberg on Saturday.The pipeline was just weeks away from completion, with 94% already constructed, when U.S. sanctions halted work. There’s a small section in Denmark’s waters that needs to be finished. Before the halt, Nord Stream 2 hoped to finish construction by the end of 2019 or in the first few months of this year. That would allow gas deliveries in time to supply Europe by winter 2020-2021.Besides OMV, Nord Stream 2’s other European backers are Royal Dutch Shell Plc, Uniper SE, Engie SA and Wintershall AG.\--With assistance from Anna Shiryaevskaya.To contact the reporters on this story: Patrick Donahue in Munich at email@example.com;Matthew Miller in Munich at firstname.lastname@example.orgTo contact the editors responsible for this story: Ben Sills at email@example.com, Iain RogersFor more articles like this, please visit us at bloomberg.comSubscribe now to stay ahead with the most trusted business news source.©2020 Bloomberg L.P.
(Bloomberg) -- A Russian pipe-laying vessel is on the move in the Far East, feeding speculation that Gazprom PJSC will work out a way to circumvent U.S. sanctions and complete a controversial natural gas link.The ship, Akademik Cherskiy, on Sunday left the port where it had been stationed in Nakhodka on Russia’s Pacific coast. At the end of last year, Energy Minister Alexander Novak mentioned that vessel as an option to complete the Nord Stream 2 pipeline in Denmark’s waters.U.S. sanctions against the pipeline forced the Swiss company Allseas Group SA to abandon work on the pipeline at the end of December. The line would feed gas from fields in Siberia directly into Germany, circumventing the current main transport corridor through Ukraine. President Donald Trump says Europe should cut its reliance on Russia for gas and instead buy cargoes of the fuel in its liquid form from the U.S.Gazprom has said it’s looking at options to complete Nord Stream 2, though it hasn’t given any details on where it will find the ship to do the work. It isn’t clear whether the Akademik Cherskiy is part of the solution. One of the pipeline’s financial backers is anticipating progress will be made.“My understanding is they are looking for a ship, and it’s my bet I think they will find the ship,” said Rainer Seele, chief executive officer of OMV AG. “How long it will take them and how they are going to continue the pipe-laying, I don’t know.”The Austrian oil and gas company helped fund the project that’s owned by Gazprom PJSC, Russia’s main gas export company. Seele said he’s not involved with talks on operational issues for Nord Stream 2, serving only as a financial backer.The vessel is now expected to arrive in Singapore on Feb. 22, according to ship-tracking data on Bloomberg.The pipeline was just weeks away from completion, with 94% already constructed, when U.S. sanctions stopped work. There’s a small section in Denmark’s waters that needs to be finished. Before the halt, Nord Stream 2 hoped to finish by the end of 2019 or in the first few months of this year. That would allow gas deliveries in time to supply Europe by winter 2020-2021.“Pipe-laying, especially in the section of shallow waters, it isn’t a super-duper technology that you need,” Seele said in an interview in Bloomberg’s European headquarters in London on Friday. “It’s just the question of whether or not the setup of the ship fits for the pipe-laying activities. Maybe it’s a different ship than the ship that everyone is observing. I don’t know. I have no idea.”The Russian gas exporter has to find ways to complete the project on its own. Gazprom has been tight-lipped as to what means it has at its disposal, only saying that its Nord Stream 2 AG unit, the project operator, is drafting options and that the pipe will be finished by the end of this year.Besides OMV, Nord Stream 2’s other European backers are Royal Dutch Shell Plc, Uniper SE, Engie SA and Wintershall AG.Why World Frets About Russia’s Nord Stream 2 Pipeline: QuickTakeEurope needs additional gas because declines in domestic production are “enormous” and there may be more room for gas in Germany’s power generation as the nation shuts down dirtier-burning coal plants, Seele said.\--With assistance from Olga Tanas and Dina Khrennikova.To contact the reporter on this story: Anna Shiryaevskaya in London at firstname.lastname@example.orgTo contact the editors responsible for this story: Reed Landberg at email@example.com, Andrew ReiersonFor more articles like this, please visit us at bloomberg.comSubscribe now to stay ahead with the most trusted business news source.©2020 Bloomberg L.P.
Russia is struggling to find alternatives to Ukraine’s transit pipelines, forcing Moscow to sign new transit deals with Kyiv despite underlying geopolitical tensions
Emerging market stocks rose for the second straight session on Wednesday, as a drop in new coronavirus cases raised hopes that the fallout of the epidemic on the world's second biggest economy might not be as bad as previously feared. On Wednesday, China reported its lowest number of new cases of the flu-like virus since late January, lending weight to a prediction from its senior medical adviser that the outbreak, which has now killed over 1,100 people, could be over by April. A basket of emerging market stocks was up 0.6%, with Chinese equities ending higher for the seventh day in a row.
GDANSK/MOSCOW, Feb 11 (Reuters) - Demand for Russian corporate Eurobonds this year has outstripped supply more than three times over as meaty yields overshadow risk of an economic slowdown from the knock-on effects of the coronavirus outbreak in China, analysts say. Russia's central bank cut its benchmark interest rate to 6% last week, but that remains well above the near-zero rates in western markets and gives investors decent returns on domestic assets. This helped Russian corporate Eurobond issues reach a total equivalent to nearly $13 billion last year.
Asian spot prices for liquefied natural gas (LNG) plummeted to multi-year lows this week, pressured by a lack of demand to consume abundant supplies. The average LNG price for March delivery into northeast Asia was estimated at around $4.00 per mmBtu, down $0.60 per mmBtu from the previous week, several sources said. Commodity trader Vitol sold a cargo to BP on Friday for March 22-26 delivery at $3.95 per mmBtu in the S&P Global Platts Market on Close window.
Could Public Joint Stock Company Gazprom (MCX:GAZP) be an attractive dividend share to own for the long haul...
Shell and Russia's Gazprom Neft have expanded their Russian joint venture by acquiring a licence for exploration and production of conventional hydrocarbon reserves in West Siberia, the two companies said on Friday. The JV, Salym Petroleum Development (SPD), will get the Salymsky 2 block in the Khanty Mansiisk Autonomous Region.
(Bloomberg Opinion) -- In his state of the nation address on Wednesday, Russian President Vladimir Putin proposed a sweeping constitutional reform that would give him several options to retain power after 2024, when his term ends. The announcement led to the resignation of Prime Minister Dmitry Medvedev’s government, showing that a full reset of Russia’s governance system is underway — and that Medvedev won’t succeed Putin as president, as he did for one term in 2008.Having spent the first hour of the 80-minute speech on demographics and the economy, Putin suddenly turned to the constitution. Most of his proposals would leave Russia, whose current constitution now enshrines near-dictatorial presidential powers, with a less powerful presidency — and a more limited choice of potential presidents.First, Putin suggested that only people who have resided in Russia continuously for more than 25 years and who have never possessed a foreign passport or permanent residence permit should be allowed to run for president. The current version of the constitution says a second citizenship in no way limits a Russian’s rights. Putin’s proposals would rule out a large number of wealthy and educated Russians. According to flawed official statistics, 543,000 Russians hold a second citizenship or a foreign residence permit. The reforms would also cut off the country’s huge emigre community, which the United Nations Population Division estimates at 10.5 million, the equivalent of some 7% of Russia’s population. This is part of what Putin sees as a sovereignty-enhancing package: According to the Russian leader, lower-ranking public servants, such as the prime minister, ministry heads, governors and judges should be banned from holding dual citizenship and foreign residence permits. He also wants Russian laws to take priority over international conventions, treaties and court rulings. Today, the constitution proclaims the priority of international obligations, which results in a steady stream of adverse rulings from the European Court of Human Rights (last year’s decisions have cost Russia about $11.4 million in damages, but behind that relatively small amount is a string of political embarrassments) and some costly debacles in various economic tribunals, such as state-owned natural gas company Gazprom’s loss of $2.6 billion to Naftogaz, the owner of the Ukrainian gas transportation system. Putin wants to make it impossible for any outside actors — international courts, Russian emigres, foreign governments, Western educational institutions — to have any effect on Russia’s inner workings.Today, it’s up to the president to choose the prime minister (the lower house of parliament only “consents” to the decision) and appoint cabinet members. Putin proposed that the full approval procedure for the prime minister take place in the lower house; same for cabinet ministers, who would be picked by the prime minister, not the president. The latter would be obliged to accept the parliament’s decisions. Moving on, Putin suggested giving the upper house of parliament — which, unlike the directly elected lower chamber, consists of regional representatives — a say in the key security, defense and foreign policy appointments, today an exclusive province of the president. He also signaled his consent to a change that would eliminate the loophole that allowed him to return to the Kremlin in 2012: the constitutional formula that bans a president from serving more than two consecutive terms. According to Putin, he’s fine with eliminating the word “consecutive,” which would bar him from reclaiming the presidency in the election of 2030, when he turns 78.It also would have limited the ability of Medvedev to serve as president for more than one term in addition to the four years he already served. But Medvedev’s resignation as prime minister and the job offer Putin has made him — as number two on Russia’s Security Council, an important advisory body but not as key as the cabinet — means he’s not likely to be Putin’s chosen successor. By proposing curbs on presidential powers, Putin opens three paths for himself after 2024 that are less straightforward than a direct prolongation of his powers, as has occurred in Belarus and several ex-Soviet Central Asian nations. One is to become a prime minister with strengthened powers and stay on indefinitely. Another is to try running the country from the parliament speaker’s chair. The third is to govern from behind the scenes as the leader of the parliament’s dominant party — the way Jaroslaw Kaczynski, leader of the Law and Justice Party, runs Poland.All of these options require continued control over Russia’s political system, sufficient for the parliament to remain, in effect, a one-party body. As the political analyst Kirill Rogov put it in a Facebook post, “In a noncompetitive system without free access to elections for parties and candidates and with unfair, falsified elections, the transfer of powers to parliament would, most likely, mean the transfer of these powers to the leadership of the party that dominates in parliament.” He went on:Such a configuration, which resembles the Chinese one, will allow Putin to retain de facto control indefinitely, while putting forward an entire group of potential successors who would compete among themselves.But even Putin’s knowledge and control of the Russian political system don’t provide a strong guarantee of lifelong power retention or, perhaps more importantly for Putin, a lifelong personal security guarantee. Strengthening other players in a complex system doesn’t fit his leadership style. That’s not what he has done for the last two decades.That’s what makes another proposal Putin threw out in Wednesday’s address especially intriguing. Putin would like to enshrine in the constitution a clear role for the State Council, a body that now has only an advisory capacity. Putin created the council soon after taking power in 2000, and it includes the regional governors, the speakers of both houses of parliament and parliamentary party leaders. Today, the president is chairman of the council. But that won’t necessarily be the case after the proposed reform; Putin may opt to head the council after giving up the presidency, which would make his post-2024 role a lot like that of Kazakhstan’s first president, Nursultan Nazarbayev, who gave up his old post last year to serve as head of the country’s newly empowered Security Council.Putin’s constitutional reform proposals are so far-reaching and, in some key aspects, so vaguely formulated that a lot of questions remain unanswered. Putin proposed adopting the reform by popular vote, but it’s unclear how such a vote could be structured (perhaps Turkish President Recep Tayyip Erdogan’s constitutional referendum of 2017 can serve as a model). Establishing the primacy of Russian laws over international treaties appears to require the adoption of an entirely new constitution, since it reconsiders one of the current document’s basic tenets. The powers and composition of the State Council are also unclear, as is the extent to which the parliament’s powers are to be expanded; for example, whether it will be able to fire ministers, not just appoint them.There’s a reason, however, for Putin to put out all the ideas now. The Russian establishment has been getting worried about the direction of the transition and about Putin’s intentions. Now, it should be clear to everyone that he’s about to seek a role that’s different from the presidency, a position above the fray. It’s not in Putin’s interest to announce exactly which one, but it’s important for him to signal that he’s in charge of working out the final shape of things — and that he intends to stick around after 2024 in some capacity. Otherwise he’d let his successor come up with any constitutional changes that might be necessary.The Russian opposition, of course, has read the signals, too. “The main outcome of Putin’s address: How dumb and/or crooked are all those who said Putin would leave in 2024,” tweeted Alexey Navalny, Putin’s best-known political opponent.Indeed, whatever the formal shape of the political system Putin intends to create at the end of his presidency, Russia’s real constitution is in Putin’s head. That’s where the missing details will come from, too.To contact the author of this story: Leonid Bershidsky at firstname.lastname@example.orgTo contact the editor responsible for this story: Tobin Harshaw at email@example.comThis column does not necessarily reflect the opinion of Bloomberg LP and its owners.Leonid Bershidsky is Bloomberg Opinion's Europe columnist. He was the founding editor of the Russian business daily Vedomosti and founded the opinion website Slon.ru.For more articles like this, please visit us at bloomberg.com/opinionSubscribe now to stay ahead with the most trusted business news source.©2020 Bloomberg L.P.
(Bloomberg Opinion) -- Russia and Ukraine, locked in a decades-long bad marriage when it comes to natural gas, just agreed to extend the misery a little longer. The arrangement by which Moscow had the gas and Kyiv had the pipes worked fine when both flew the hammer and sickle; not so much since their nominal divorce, with Ukraine moving out and Russia ultimately trying to move back in.Geopolitical intrigue persuades even the most disinterested to take notice of energy markets. Yet, as a new history of the intertwined Russian and European gas industries shows, destiny is often shaped by the prosaic. There is plenty of drama in “The Bridge” by Thane Gustafson, an IHS Markit expert on Russian energy, from secret Cold War-era meetings in an Austrian castle to the tale of Ukraine’s former prime minister, revolutionary and one-time “gas princess,” Yulia Tymoshenko.The bigger story concerns a lower-key kind of revolution, chiefly in technology and economics. And it is one reshaping not just gas in Russia and Europe, but energy markets worldwide.The beginnings of the Russia-Europe gas “bridge” in the 1960s were complicated by the Iron Curtain, of course, but were, in commercial terms, pure vanilla. Russia needed money and technology (especially steel pipe and compressors) to develop its vast Siberian gas reserves, and the one market that could supply those things and also needed the gas was Western Europe. Early deals with Austria and, especially, the two Germanies had a barter-like quality. Which was just as well; in the absence of liquid energy markets, no one had a clue what the real “price” of gas was.Gas is different from oil because it’s much harder to transport or store. By and large, you need a physical link, usually a pipeline. Building these costs a lot, and bankers are more amenable if you show them a signed long-term contract. Typically, these were structured to price the gas as a function of oil — a liquid market — meaning the seller was exposed to some risk if oil prices fell. On the other side, the buyer committed to take or at least pay for a minimum quantity of gas, meaning they were exposed if demand fell. Everyone’s happy, more or less.Until they’re not. Besides the Berlin Wall, Ronald Reagan’s and Margaret Thatcher’s neoliberal tendencies took a pick-axe to the old gas bridge. By the early 1990s, just as Russia’s gas revenue was becoming “the mainstay of a failed state,” as Gustafson writes, ideas about shifting Europe’s energy markets away from vertical integration and opaque contracts toward choice and transparency began spreading eastward from the U.K., with Brussels just across the Channel. Gustafson chronicles the long battle undertaken by the European Commission — and especially competition heads Neelie Kroes and Margrethe Vestager — to break up the chummy club that was the Continental gas market and ultimately take on Gazprom PJSC’s long-term contracts. Ideology will only get you so far, though. What allowed the European Commission to assert its program was a mixture of time and technology. Since the 1960s, Europe’s isolated municipal gas networks had spread across the map like ivy, creating a continent-wide network. Networks — especially incorporating liquefied natural gas terminals — mean you aren’t beholden to one supplier and their steel umbilical cord. Add in the ability to trade gas in real time due to ever more powerful computing, and the building blocks are in place to create a liquid, competitive market with transparent pricing.Gazprom was understandably resistant to this sort of thing, preferring the certainties, relationships and, of course, leverage of the old bridge. It’s tougher to browbeat an anonymous hedge fund in London than a functionary in some eastern European gas ministry (just ask Belarus). That said, Gazprom adapted well in certain respects, such as building an international trading operation. Yet institutional resistance to change also left it flat-footed, particularly when it comes to LNG. President Vladimir Putin, whom Gustafson describes as “an energy geek,” saw reasonably early that LNG was the future, and he ultimately bypassed Gazprom in lending tacit support to the rise of independent operator Novatek PJSC.Geek Putin may be; mastermind would be a stretch. His strong-arm tactics via gas-supply cutoffs in 2006 and 2009 served mostly to push Ukraine further away, damage Gazprom’s reputation and, above all, demonstrate the energy weapon worked better back when customers were isolated, gas-hungry dependents rather than networked counterparts with options. Even Ukraine has loosened Russia’s grip, in part via dramatic declines in the country’s energy intensity.Putin is a fast learner, though. His championing of LNG, along with that recent tactical Ukraine deal and new pipelines to Germany, Turkey and China, demonstrate an understanding that one way to deal with the diversification of Russia’s biggest gas customer, Europe, is to diversify its own options. Even here, though, it is worth pointing out that efforts to build alternative export routes, such as the Blue Stream pipeline to Turkey, began before Putin’s ascent to power.For me, the most important line in “The Bridge” is where Gustafson notes that, despite Western Europe’s dwindling domestic gas production, its strengthened network provides greater security: “It matters less today who supplies the gas than that market forces create checks and balances.” This is a defining aspect of the transition away from the 20th century’s largely oligopolistic energy models. Rapid demand growth and the geographical inequities inherent to fossil-fuel resources favor suppliers. The rise of sophisticated networks, along with fuel-on-fuel competition and sheer conservation of energy, are changing that. There is a lesson in “The Bridge” for Washington, which, having spent decades successfully countering energy potentates by fostering liquid markets and efficiency, now seeks to exert raw power via its “molecules of U.S. freedom.” This is an anachronism in an age of networks, albeit one that reflects America’s seeming disenchantment with those networks.As for Russia, it’s adapting to the new commercial realities (and their impact on old geopolitical norms). Still, with hydrocarbons accounting for almost half the federal budget and the energy sector generating the lion’s share of export revenue, the country remains chronically under-diversified at an important level.And the world continues to move on, most importantly with respect to climate change. In a recently published critique of Moscow’s energy strategy to 2035 — sub-titled, tellingly, “Struggling to Remain Relevant” — the authors(2) observe that “the climate agenda is last and least in the order of priorities.” Yet it is this that presents an existential challenge to Russia’s energy income, regardless of this or that pipeline, with timing being the big variable. How Russia remakes itself for the energy transition is, thankfully, the subject of Gustafson’s next book project.(1) Tatiana Mitrova, director of the energy center at the Moscow School of Management-Skolkovo, and Vitaly Yermakov of the Oxford Institute for Energy Studies.To contact the author of this story: Liam Denning at firstname.lastname@example.orgTo contact the editor responsible for this story: Mark Gongloff at email@example.comThis column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.Liam Denning is a Bloomberg Opinion columnist covering energy, mining and commodities. He previously was editor of the Wall Street Journal's Heard on the Street column and wrote for the Financial Times' Lex column. He was also an investment banker.For more articles like this, please visit us at bloomberg.com/opinionSubscribe now to stay ahead with the most trusted business news source.©2020 Bloomberg L.P.
The recent gas transit deal between Russia and Ukraine, and their national gas companies Gazprom and Naftogaz respectively, has comforted Europe just about when the first cold spells started to bite
Russia has started European gas deliveries through the new TurkStream pipeline to Turkey, Bulgaria's Bulgartransgaz said on Sunday, as Moscow looks to reduce shipments via Ukraine. Russia is building TurkStream and doubling the capacity of NordStream across the Baltic Sea to Germany as part of plans to bypass Ukraine in its gas deliveries to Europe.
(Bloomberg Opinion) -- One of the buzzier books in business circles this past decade was Joshua Cooper Ramo’s The Seventh Sense. Its principal insight: The mere act of connecting things — from the device you’re reading this on to terrorist groups to whole societies — changes the nature of those things.This is nothing new for energy, the original global network of the modern age making all the other networks possible. What is new is that pathways that defined energy for decades are undergoing fundamental changes. The past decade’s jumble of frackers, Arab Springers, Muskovites, GND-ers, teenage sailors and millennial princes are all, in their disparate and sometimes opposing ways, part of the same thing: Energy’s great rewiring.Hustle And FlowThe frackers fooled everybody. Seemingly out of nowhere, America’s oil and gas business shook off decades of geriatric decline to take its biggest leap of any decade — ever. Simultaneously, U.S. energy consumption has flattened out, a striking shift from 20th-century trends.America flipped from fears of shortages to chest-beating about freedom fracks, reshaping the global energy trade along the way. Terminals to import liquefied natural gas were repurposed to pump out exports, up from virtually nothing in 2008 to 7% of the global LNG market in 2018 and climbing.In oil, demand from emerging markets overtook the OECD in 2013, with Asia tilting the board decisively eastward. In September 2019, the U.S. exported more oil than it imported for the first time since the Energy Information Administration began compiling monthly data in 1973. All that star-spangled energy hustling its way onto the high seas means heightened competition — and, thereby, deflation. The great irony of the frackers’ success is that it has mostly eaten their balance sheets. It has also eaten OPEC’s lunch; or rather, OPEC+, a marvelous construct where adding the positive advertises the underlying negative. Now more of a Saudi-Russian diarchy with a boisterous entourage, it closed out the decade with a contentious meeting to extend six-month supply cuts into their fourth year. Simultaneously, Saudi Arabia took the momentous step of floating the biggest, most profitable oil company on the planet; albeit resorting to an IPO that was more stage-managed than your average OPEC+ meeting. The big thing here isn’t so much volumes as vectors. When supply options multiply, consumers win. This is what oil-consuming nations did after the crises of the 1970s. More recently, LNG terminals and market reforms have enabled European countries to extract concessions from Russia’s Gazprom PJSC on gas supplies. The latter has, in turn, belatedly discovered the joys of LNG and sending gas eastward to diversify its own risks.(3) The Standard Oil Trust was broken up in 1911, but energy has remained fertile territory for oligopolies ranging from the Seven Sisters to OPEC (plus, of course, monopoly utilities) for much of the period since then. There’s a reason for that: Modernization required developing vast quantities of energy, which entailed raising vast quantities of capital — which demanded a level of certainty on pricing and control. The rewiring of the energy trade shifts power from sellers to buyers.The Smallest Guys In The RoomSome of that rewiring is literal. CERAWeek, oil’s annual get-together in Houston organized by IHS Markit, featured barely any IT companies in 2012 (IBM was there). Come 2019, the sponsor list was headlined by the likes of Amazon Web Services and Microsoft Azure. Smaller shale producers spent the past decade — especially those leaner latter years — engaged in the mother of all efficiency drives, applying more of a manufacturing mindset (aided by a hefty dose of Big Data) than the bespoke approach of Big Oil’s traditional mega-projects.This was also the decade of the really little guy: the consumer. Big Energy’s longstanding mission was to expand supply, assuming bottomless demand would take care of itself. Now supply looks more bottomless than demand. So oil majors have rediscovered the charms of such things as petrochemicals and service stations, with Royal Dutch Shell Plc memorably trying to compare itself with another Main Street purveyor of addictive liquid energy.Big Power, its wires snaking their way into our very bedrooms, should have a head start on this. In theory. Attending a Bloomberg NEF summit in New York a few years ago, I heard a utility executive opine that “customers are finally becoming part of the energy value chain.” (6) Profound stuff, obviously, but also raising a rather troubling question: Thomas Edison died almost 90 years ago and customers are just entering the value chain now?That executive was right, though. Like drivers tied to gasoline pumps, consumers of electricity haven’t been spoiled for choice. Mostly, they haven’t cared so long as the lights came on. Flattening demand, cheaper technology and the odd (or increasingly routine) wildfire or deluge have begun to change that, spurring efforts to improve not just the quantity but the quality of electrons.It was only in 2015 that the Energy Information Administration even began publishing figures on U.S. rooftop-solar generation. Meanwhile, corporations from Apple Inc. to Exxon Mobil Corp. to Las Vegas casinos have also begun tugging at their ties to monopoly utilities (disclosure: My wife’s company enables virtual power plants using distributed energy resources).The proliferation of renewable and distributed energy changes the nature of how electricity is generated and consumed. Wind and solar power aren’t a mere evolution from fossil fuels. Extracted fuels require lengthy distribution chains from (usually) concentrated sources, requiring gigantic investment every year just to maintain current supply. That is a world conducive to oligopolies. Renewable energy is localized, modular and relatively unconstrained by geography, particularly in terms of technological development — oil comes from a few chosen geographies, but a battery laboratory or turbine factory can be anywhere. Renewables also exhibit the steady decline in costs you would associate with manufacturing, with utility-scale solar power’s all-in cost down 85% since 2010.We have seen the impact of this change in the physical grid itself, pushing it toward more of a multi-directional network rather than just utility-owned hubs pumping power down the spokes. Electricity also arced over in a big way to transportation, with hybrid and battery-powered vehicles putting a crack in oil’s previously unassailable redoubt. Just as coal did to wood, and natural gas did to coal, and renewables are doing to both of them.Back in the late 1870s, some oil producers in Pennsylvania took a novel approach to escaping Standard Oil’s grip on the market: They built a long-distance pipeline, bypassing John D. Rockefeller’s ubiquitous logistics network(7). Today’s LNG tankers, community-solar farms, electric sedans or demand-optimization software have a similar effect. A world used to thinking of fixed energy markets served by this or that specialized fossil fuel or producer has a growing range of choices cutting across geographies and technologies.More connections competing in a wider network, in other words.Plug In, Log On, Freak OutAccess to electricity was the last century’s hallmark of modernity (and it remains an aspiration for one in 10 people). Being plugged-in today means something more: Internet penetration doubled over the past decade to more than half the global population, four billion people or so(8).Energy networks? No. Energetic? Wildly so.The decade kicked off with an Arab Spring drawing organizing power from what was a relatively new tool: social media. The resulting oil-price spike supercharged the U.S. fracking boom — ultimately putting even more pressure on oil-funded social contracts across much of the Middle East. Another canny user of virtual networks is environmental activist Greta Thunberg, who went from Stockholm street protester to Time Magazine’s Person of the Year in a flash.As with the change in energy’s proprietary networks, smartphones and bandwidth put more power into the hands of individuals — and simultaneously raised the risks of manipulation and surveillance — during a restless decade in the shadow of the financial crisis and fraying acceptance of globalization and liberal market economics. Observing the rise of digital populism and such earthquakes as Brexit and the election of America’s first tweeter-in-chief, Kevin Book of ClearView Energy Partners writes that “fast, socially mediated culture is colliding with a slow democracy.”Just as everyone is plugging in, the U.S. is tuning out. For energy, the aughts were defined by China’s emergence as a trading superpower. The teens are ending with a backlash against that — and emanating from the very country that underwrote the free-trading system enabling it.President Donald Trump’s Christmas trade truce with China belies the bigger shift underway (Democratic opponents aren’t fans of Beijing either). From hobbling the World Trade Organization to dumping the Carter Doctrine for a Barter Doctrine, Washington is calling time on its global commitments, in part because it no longer worries so much about oil imports. Global energy markets grew up under a Pax Americana emphasizing free flows and the sanctity of markets. Now the Secretary of State speaks of using energy to further American “values”. As Peter Zeihan, whose new book Disunited Nations foresees a return of old-style great power rivalries, writes:The Americans are not so much passing the torch as dropping it. It will start quite a few fires before someone picks it up.One thing to watch in the 2020s is the interplay of trade friction with multi-speed climate policies, with the latter potentially exacerbating the former. Two broader trends will also shape the next decade.First, energy’s incumbent model — based on the primacy of growth, tolerance of dangerous climate and geopolitical externalities, and reliance on the post-war trade and security order — is no longer fit for purpose. We will continue to engage in furious debate about how to fix that, but simply saying large-scale change is unrealistic runs into the reality that not changing is unrealistic. Meanwhile, a generational shift in politics is underway: Americans younger than the baby boomers accounted for a slight majority of votes for the first time in 2016 and the gap is widening. That guarantees nothing in terms of outcomes, of course, but the potential for sudden policy changes will increase.Second, the invisible network bankrolling energy’s visible networks is changing already. Coal miners were this past decade’s canaries about what happens when long-held assumptions about energy demand go awry. Oil and gas producers aren’t under nearly the same pressure right now. But a decade of poor financial performance due to an old-school emphasis on growth at all costs has weakened their relationship with capital markets just as the latter are also waking up to climate change. The deflation unleashed by shale and broader competition has kicked away a big reason to own these stocks: the oil-price option, a hedge against supply shocks.Risk isn’t the end of the story, though; reconfiguring the world’s energy networks is also a mammoth opportunity (as was the overhaul of our global communications systems over the past couple of decades). One of the weirder developments of this bit of the 21st century has been the use of ever-cruder arguments and policy volleys to consolidate America’s status as a producer of raw commodities rather than as an innovator in the next generation of energy technologies.In his latest quarterly review for investors, James Murchie, founder and CEO of Energy Income Partners LLC, which invests largely in pipeline and grid operators, writes that the shift from scarcity to abundance will shift investors away from owning traditional energy assets that benefit from supply disruptions toward those that benefit from fundamental disruption. Or, as he puts it, “toward owning the parts of the energy sector that will continue to benefit from — rather than suffer from — technological innovations that lower the cost of cleaner forms of reliable and safe energy.”Putting tangible values on things like atmospheric integrity rather than treating them as infinite landfill would speed that shift. Although this notion has been around for at least a century, it battles an incumbent view (and interests) hardwired for harvesting rather than conservation. In light of rising awareness and outrage over climate change, that incumbent view has aged in dog years over the past decade. The most potent, necessary, and ongoing act of energy’s rewiring concerns those thousands upon thousands of miles of network called the human brain. (1) Europe accounts for the bulk of the world's piped gas trade, sucking in volumes mainly from Russia, the North Sea and Africa. It accounted for more than two-thirds of pipeline exports in 2008, according to BP's Statistical Review of World Energy. By 2018, that was down to 59%. More importantly, while LNG's share of Europe's imports had only edged up from 12% to 13% in that time, the mere fact that the region's options for importing gas had multiplied put pressure on the likes of Gazprom to concede on terms. In this context, the recently opened "Power of Siberia" pipeline would be more accurately named "Power of China."(2) This was Andrew Vesey, then CEO of Australianutility AGL Resources Ltd. He is now CEO of a utility which really needs to work on its customer-relationship skills, Pacific Gas and Electric Co., the main subsidiary of PG&E Corp. The summit was held in 2017.(3) As detailed in chapter two of Daniel Yergin'sThe Prize.(4) Obviously, these 21st-century networks still requireaccess to a more 20th-century plug at least occasionally.To contact the author of this story: Liam Denning at firstname.lastname@example.orgTo contact the editor responsible for this story: Mark Gongloff at email@example.comThis column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.Liam Denning is a Bloomberg Opinion columnist covering energy, mining and commodities. He previously was editor of the Wall Street Journal's Heard on the Street column and wrote for the Financial Times' Lex column. He was also an investment banker.For more articles like this, please visit us at bloomberg.com/opinion©2020 Bloomberg L.P.
Russia’s Energy Minister Alexander Novak said on Friday that Gazprom would launch Nord Stream 2 by the end of 2020 as the country moves forward to gain control of global gas markets
With the completion of the Nord Stream 2 gas pipeline in sight, the true impact of Gazprom’s European power play remains to be seen
(Bloomberg Opinion) -- In the space of just a few momentous weeks, one of Russian President Vladimir Putin’s most ambitious projects — a Russian natural gas export system to match the new geopolitical reality rather than the Cold War-era one — has taken its final shape. It will probably last, without major change, until the end of Russia’s run as a top energy exporter. The finishing touches to the project, begun in 2001 with the construction of the Blue Stream pipeline to Turkey, include the launch of the Power of Siberia pipeline to China on Dec. 2, last week’s U.S. sanctions on the Nord Stream 2 pipeline to Germany, a new gas transit deal with Ukraine and the commissioning of the TurkStream pipeline, planned for January.External pressure and market circumstances have helped shape the new Russian gas export system so that it can’t really be used as a sinister tool of Putin’s rogue foreign policy. Meanwhile, it’s structured in a such a way that post-Putin Russia will still be able to maintain its energy market share and use it as a basis for useful trade partnerships. That makes it a positive part of Putin’s legacy, if not entirely thanks to Putin.Problems Inherited and Self-MadeRussia inherited contracts from the Soviet Union to supply natural gas to Europe, one of the biggest sources of hard currency for Russia’s reeling post-Communist economy. But the Soviet pipelines were laid across Ukraine and Belarus, which were part of the empire. But they became independent nations that demanded transit fees and low-priced energy supplies in exchange for maintaining Russia’s energy supplies to Europe, or rather, to its ex-Communist part, where Russia and everything that came from it were newly unpopular.At the same time, gas suppliers in Central Asia and Azerbaijan presented a competitive threat: It was relatively easy for them to pipe gas to Turkey, which could deliver it further to Europe.In the 2000s, when Putin and his advisers nurtured the notion of Russia as an “energy superpower,” it became clear to Kremlin strategists that they needed more flexibility to increase supplies and get more economic leverage over neighbors in Europe and Asia. Blue Stream, laid across the bottom of the Black Sea to the Turkish port of Samsun and opened in 2003, was the opening move of the Putin gas game.But Blue Stream’s capacity of 16 billion cubic meters of natural gas per year was dwarfed by the roughly 180 billion cubic meters the Soviet-built pipelines could export to Europe via Ukraine and Belarus. It helped Russia compete in Turkey, but didn’t solve the bigger problem of Russia’s dependence on Ukraine and Belarus. The share of European natural gas imports that came from Russia kept falling.In 2011, Russia obtained full control over the Belarussian gas transit system in exchange for discounted gas supplies. But Ukraine remained firmly in control of its pipelines, which accounted for the lion’s share of Russia’s export capacity.Putin wanted more direct access to southern and western Europe. He wanted to be able to bypass Ukraine, for both economic and political reasons. The Ukrainian pipeline system, run by National JSC Naftogaz Ukraine, was falling into disrepair, and Gazprom, the Russian export monopoly for pipeline gas, feared it might have to invest in fixing it without having much influence over its operation. At the same time, Putin wanted leverage over the Ukrainian government to keep it in Moscow’s orbit. Twice in the 2000s, Russia cut off gas supplies to Ukraine to try to bring it to heel, but without alternative export routes, such tactics were unsustainable.In 2012, Russia made another major move with the opening of Nord Stream, stretching across the bottom of the Baltic Sea to northern Germany. With a capacity of 55 billion cubic meters a year, it boosted Russia’s share of European imports. At the same time, Russia was planning a major pipeline to southern Europe, South Stream, across the Black Sea to Bulgaria. From there it would branch out to carry gas to Greece, Italy, Serbia and on to central Europe. The 2014 Crimea annexation made it imperative for Putin to redraw the gas export map. Now, Ukraine wasn’t just an inconvenient partner, it was an adversary, and bypassing it became a geopolitical necessity for Putin. Europe, too, was more worried than ever about increasing gas exports from Russia, which could use it to expand its political influence. The European Union scuppered South Stream in late 2014 by putting pressure on Bulgaria. Plans to expand Nord Stream by laying two parallel strings of pipe, known as Nord Stream 2, also became politically toxic, especially given U.S. resistance to that project: In Washington, fears of increased Russian leverage over Germany were compounded by the desire to supply more U.S. liquefied natural gas to Europe.Art of the PossibleThe way Russia altered its gas export plans in the last five years reflects a major shift in its geopolitical thinking. Putin’s anti-Western partnerships with key authoritarian regimes — those of Turkish President Recep Tayyip Erdogan and Chinese President Xi Jinping — had to be backed up with gas pipelines. At the same time, Putin wanted to maintain a lifeline to Germany, with its history of regime-agnostic Ostpolitik; Putin, a German speaker and a former Soviet intelligence agent in East Germany, sees Russia’s relationship with Europe as one with Germany first, even if Chancellor Angela Merkel is one of the continent’s least Putin-friendly leaders.So South Stream mutated into TurkStream, a pipeline with a planned capacity of 31.5 billion cubic meters running to the western part of Turkey, from where gas will flow to the Balkans. It was first filled with gas in late November, and Putin and Erdogan plan to inaugurate it on Jan. 8.The pipeline to China, Power of Siberia, which should be delivering 38 billion cubic meters of gas a year by 2024, opened early this month, with Putin and Xi watching via video link. It runs from Gazprom’s deposits in Eastern Siberia, too far from Europe for deliveries to make economic sense.At the same time, Russia has made a point of competing with the U.S. and Middle Eastern suppliers on the new and fast-expanding European market for liquefied natural gas. Novatek PJSC, a private company in which state-owned Gazprom is a minority shareholder along with France’s Total SA, started exporting from its enormous LNG facility on the Yamal Peninsula in 2018, and this year it approved a $21 billion investment in a second LNG plant. (Gazprom and Rosneft, another state company, have their own LNG capacity, but mostly for export to Asian markets). In the third quarter of 2019, Russia was the EU’s second biggest LNG supplier after Qatar, with 15% of imports; the U.S. was fourth, with 12% — although data from the U.S. Energy Information Administration show that the U.S. has overtaken Russia more recently.All these developments make it almost inevitable that Russian natural gas exports will keep increasing as spare production capacity keeps shrinking. Though vessels laying pipe for Nord Stream 2 and their owners have been sanctioned by the U.S., and Swiss contractor Allseas has suspended work on the project to avoid falling afoul of the U.S. government, that pipeline will be completed, too. Gazprom and one of its Russian contractors have pipe-laying vessels of their own. Though they’ll move slower than the bigger one provided by Allseas, Peter Beyer, the German government’s coordinator for trans-Atlantic issues, said in a radio interview on Monday that the government expected Nord Stream 2 to be operational in the second half of 2020. The delay has forced Russia to do a better deal with Ukraine than it would have been able to negotiate had there been no Nord Stream 2 sanctions. To replace the transit deal that runs out at the end of this year, Russia was trying to sign a mere one-year extension. Ukraine and the EU, which mediated the talks, were fighting for a 10-year contract that would spell out a minimum amount of gas for Gazprom to pump every year. Ukraine gets about $3 billion a year in transit fees from Gazprom, and it would develop a major hole in its budget without the funds.Russia agreed to a five-year deal with a minimum of 65 billion cubic meters to be supplied in 2020 (slightly less than this year’s projected imports) and 40 billion cubic meters in the following years. Both sides compromised on outstanding litigation that arose from the two countries’ previous tumultuous relationship as partners in the natural gas business. Gazprom agreed to pay Naftogaz the $3 billion it had won in an arbitration case, and Naftogaz agreed to drop lawsuits seek an additional $8 billion and to refrain from filing any others.Other compromises may have been reached, too. It’s been reported in Ukraine that Russia might resume direct supplies of gas for Ukraine’s own needs — something unthinkable under former Ukrainian President Petro Poroshenko’s government, when Ukraine was buying Russian gas in the EU rather than deal with the invader of Crimea. Russia is denying that direct supplies are part of the deal, but current Ukiraine president, Volodymyr Zelenskiy, is more pragmatic than Poroshenko was and eager to end the armed conflict Russia has instigated in Ukraine’s eastern regions. The new gas deal, described by the EU official who brokered it as a win-win solution for both sides, shows that Putin, with his transactional approach to foreign policy, values Zelenskiy’s willingness to bargain and compromise. As a result, Ukraine will remain an important pillar of the new Russian gas export scheme at least for the next five years. Though Putin didn’t originally want that, making every effort to establish gas supply channels that go around it, Russia’s resulting export system is remarkably balanced. It links Russia to China, Turkey, southern, northern and eastern Europe. All these markets are competitive, especially in Europe, where the EU has cracked down on Gazprom’s earlier attempts at monopoly pricing.Putin may have made and changed his plans for export channels in hopes of geopolitical leverage. This — and the big infrastructure contracts for Kremlin cronies that came with the pipeline buildout — helped justify the tens of billions of dollars invested in the pipeline and LNG projects. Gazprom’s capital expenditure has averaged $6.4 billion per quarter in the last five years, some 23% of the average quarterly revenue over the same period. The company has remained profitable throughout, but it has more than doubled its debt load since 2013, while revenue has increased by a projected 40% this year compared with 2014.Now that the infrastructure mostly is in place and the deposits needed to feed it are either online or coming online in the near future, the marginal cost of exporting gas will be relatively low, and Russia is guaranteed a solid export revenue stream in a fast-changing global gas market. That’s important for a country that exported $49.1 billion worth of natural gas in 2018 and collected some 7% of its budget revenues from the gas industry. Russia's export partners, of course, eventually move to phase out fossil fuels. That, however, won’t be happening anytime soon, as both Europe and China will need more gas as they replace coal. Russia is projected to account for around a third of the EU’s gas supply at least until 2040. Putin will be gone by then, but Russia’s energy trade will be more diversified than when he came to power. More benign Russian governments will be able to use it as a basis for good neighborly relations rather than as an instrument of pressure. The results of Putin’s grand project show how multiple players — Putin the ambitious authoritarian, his situational allies such as Erdogan and Xi, his adversaries such as the U.S., his reluctant partners such as the EU and his victims such as Ukraine — can combine efforts to build something worthwhile. To contact the author of this story: Leonid Bershidsky at firstname.lastname@example.orgTo contact the editor responsible for this story: Robert Burgess at email@example.comThis column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.Leonid Bershidsky is Bloomberg Opinion's Europe columnist. He was the founding editor of the Russian business daily Vedomosti and founded the opinion website Slon.ru.For more articles like this, please visit us at bloomberg.com/opinion©2019 Bloomberg L.P.
U.S. President Donald Trump imposed sanctions last week on the Nord Stream 2 pipeline designed by Moscow to bypass Ukraine and increase gas supplies via the Baltic Sea to Germany, Russia's biggest energy customer. The United States wants to sell more of its gas to Europe and has said the pipeline would make the continent too reliant on Russia, which is at loggerheads with Washington over a series of issues, including Moscow's interference in Ukraine. Russian Prime Minister Dmitry Medvedev, however, said on Monday that the pipeline would be completed in a matter of months despite the U.S. sanctions.