18.06.2021

Gas production since the beginning of the year – 8 946 774 thcm

Weighted average price of natural gas (resource of June) – 7 200 UAH/thcm excluding VAT (100% prepayment terms)

TTF – 28.28 EUR/MWh ($356)

NCG – 28.26 EUR/MWh ($356)

GPL – 28.25 EUR/MWh ($356)

CEGH – 28.42 EUR/MWh ($358)

April 2021. Monthly Gas Market Report

14/05/21

PRODUCTION

Ukraine produced 1.61 bcm of natural gas in April, which is 3.7% less than in April 2020. In April, 1.61 bcm of gas was extracted, which is 3.7% less than in April 2020.

JSC Ukrgasvydobuvannya (Naftogaz Group) reduced gas production by 5% compared to the same period last year. PJSC Ukrnafta reduced gas production by 10% compared to April 2020. Independent gas producers also showed a slight reduction in production by 1% compared to the April last year.

Hence, the share of state-owned enterprises in the total amount of gas production in April was 75.4%, independent enterprises - 24.6%.
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PRICING

April 2021 was no exception: low prices were recorded at the beginning of the month, which gradually increased later. During the first week, the price was stable and ended with a significant increase of 6% or 1.23 EUR / MWh ($16 per 1000 cm) to 20.36 EUR / MWh ($259 per 1000 cm) at the end of the week. In the period from 7 to 23 April, fluctuations were recorded with an increase of 2.57 EUR / MWh ($33 per 1000 cm) to 21.69 EUR / MWh ($276 per 1000 cm). Between April 23 and 24, the price decreased by more than 8% or 1.76 EUR / MWh ($22 per 1,000 cm), which was more than offset by the end of the month.

The highest gas price was recorded during the trading day on April 30, when the price was 22.86 EUR / MWh ($291 per 1000 cm). Thus, the difference between the lowest and highest price in April was 3.79 EUR / MWh ($48 per 1000 cm) or 20%.

As a result, the average cost of natural gas at the TTF hub in April was 20.34 EUR / MWh ($258 per 1000 cm), which is 13.77 EUR / MWh more than the same period last year. The difference was over 210%, as the average for the same period last year was 6.5 EUR / MWh.

The average price at the TTF hub, including the cost of transportation to Ukrainian border, amounted to UAH 8443 ($302 per 1000 cm) excluding VAT. It increased by almost 15% compared to March 2021.

Among the main reasons that had a positive effect on pricing:

• gas shortage in the market,
• cold weather,
• increased demand for gas to generate electricity,
• increase in fees for CO2 emissions,
• low occupancy rate of European underground storage facilities.
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The most significant reason that led to the fall in prices was an error in the nominations from the Slovak GTS Operator Eustream, as the volume of gas transit to Ukraine on the trading day on April 24 was doubled, which caused the price to fall by 8%. However, it later emerged that incorrect nominations had been submitted by the customer for transportation services and the problem was resolved.

The increase in the cost of hydrocarbons has become a major prerequisite for improving the financial position of the world's oil and gas giants. As a result, ExxonMobil, Royal Dutch Shell, Total and BP made more profit than planned in the first quarter and so on. Financial strengthening of companies after an unprecedented level of losses last year will help to continue investment activities. According to Bloomberg, ExxonMobil shares are the most successful among supermajors this year and provide a return of 44% (Chevron's closest competitor with 27%). The company made a profit for the first time since 2019 precisely because of the rising cost of hydrocarbons. Despite this, ExxonMobil found itself in an awkward position, primarily due to the decision not to cut payments last year, as, for example, did Shell and BP. As a result, the level of loans increased by 40% to $ 70 billion. The main task for the company is to combine debt repayment, investing in key projects in Guyana and the Permian Basin, as well as increasing shareholder demand for repayment. To meet these needs, jobs have been cut, a plan with large investments has been postponed, and capital spending has been announced to be reduced by $ 10 billion a year by the middle of this decade.
Oil and gas companies' policies and strategies for dealing with the crisis are different, and the consequences and continuation of the COVID-19 pandemic are unpredictable. However, increasing consumption today is a prerequisite for a natural increase in the cost of hydrocarbons in the world tomorrow. In the absence of repeated waves of morbidity, the industry is expected to gradually resume business activity.

Price correlation in Ukraine repeated the trend in European hubs and reflected a natural increase.

Hence, according to the results of e-trading on UEEX in 100% prepayment terms, the weighted average price in April amounted to UAH 6479 ($232) per 1000 cm net of VAT, which is 0.3% more than the previous month and by 100% more compared to the same period last year.

The price of the resource of April in Naftogaz Trading for industrial consumers on the 100% prepayment terms increased by 9% compared to the previous month and amounted to UAH 6853 ($245) per 1000 cm net of VAT.

According to the Ministry of Economy, the import of natural gas to the territory of Ukraine in April was carried out at the average price of UAH 7178 ($257) per 1000 m3 net of VAT, which is 23% more than in the previous month.

DRILLING RIGS. UKRAINE AND EUROPE

According to the Association of Gas Producers of Ukraine, 30 drilling rigs were used in drilling in our country in April, which is 2 pcs. (-6%) less than in March. The slight decrease is due to an increase in workovers performance.

In Europe, there were 76 active drilling rigs, which is 4 pcs. (-3%) less than in the previous month. Only two countries showed a decrease, namely: Italy (by 1 pc. or -50%) and Romania (by 7 pcs. or -70%). Instead, the countries that managed to increase capital investment in drilling: Norway (by 3 pcs. or + 21%) and Serbia and Montenegro (by 1 pc. or + 100%). The rest of the states remained unchanged.
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DRILLING RIGS. THE REST OF THE WORLD

According to Baker Hughes Rig Count, the total number of active drilling rigs in the world in April was 1159 pcs., which is 318 pcs. less (-22%) from the same period in 2020 and 43 pcs. (-4%) compared to March.

The United States increased drilling performance by 7% or plus 27 drilling rigs. Thus, the country involved 436 pcs., of which an average of 20 pcs. (+32%) for direct drilling, 396 pcs. (+7%) - for horizontal and 20 pcs. (-16%) - for vertical. Despite the increase, it is important to emphasize that this is a drop of more than 129 pcs. (-23%) by April 2020.

The cessation of drilling new wells in Canada due to the seasonal factor continues. Thus, in April, an average of 58 drilling rigs were recorded in the country, which is almost 50 pcs. (-46%) less than last month, but 25 pcs. (+75%) more than the same period last year. 54 pcs. were used for horizontal drilling. (-47%), for direct - 2 pcs. (-42%), and for vertical - 2 pcs. (-28%).

Africa, after increasing drilling volumes over the past few months, is in a state of stagnation with a slight increase by 2 pcs. (+3%). Thus, in April, 61 pcs. were recorded in the region, which despite the increase to the previous month is still a decrease of more than 42 pcs. (-41%). Algeria has become a country that is improving for the fourth month in a row. The country, growing by 2 pcs. (+8%) in April used 25 drilling rigs, which is 15 pcs. less. (-36%) for the same period last year. Ghana also managed to increase the figures by 1 pc. (+100%). Nigeria, in turn, was the only country to reduce drilling by 1 drilling rig (-17%), showing a negative trend for the second month in a row. The rest of the countries remained unchanged.

In the Asia-Pacific region, the total number of active drilling rigs was 167 pcs., which is 3 pcs. (-2%) less than the previous month, and 24 pcs. (-13%) until April 2020. Countries where growth is recorded: Indonesia by 1 pc. (+4%), Malaysia by 1 pc. (+33%), Myanmar (Burma) by 1 pc. (+100%). Three countries showed a decrease, namely: China on the offshore part by 1 pc. (-3%), India by 4 pcs. (-5%) and Thailand by 1 pc. (-33%). The rest of the countries remained unchanged.
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Latin America after a long period of stagnation in April 2021 showed a decrease of 7 pcs. (-6%), which is 29 pcs. (+33%) more than the same period last year. The decrease was recorded in countries such as: Argentina by 6 pcs. (-15%), Bolivia by 1 pc. (-50%), Suriname at 1 pc. (-50%) and Mexico by 3 pcs. (-7%). The increase, in turn, was recorded among the following countries: Brazil by 1 pc. (+ 11%), Colombia by 2 pcs. (+ 14%), Peru for 1 pc. (+ 50%).

The situation in the Middle East is fully in line with the global declining trend. The region showed a decrease of 9 pcs. (-3%), which is significantly significant in previous months and 168 pcs. (-40%) compared to the same period last year. Growth until March 2021 was recorded only in Israel by 1 pc. (+3%). The indicators decreased: Kuwait by 2 pcs. (-7%), Oman at 3 pcs. (-7%), Pakistan at 1 pc. (-7%), Qatar at 2 pcs. (20%), Abu Dhabi (UAE) by 1 pc. (-2%) and Yemen by 1 pc. (-50%). Bahrain, Egypt, Saudi Arabia, Dubai and Sudan have not changed.

Against the background of a sharp rise in prices, drilling activity is expected to increase, however, bearing in mind the time frame of the drilling cycle and the instability with the COVID-19 pandemic, it is too early to talk about significant investment in drilling.

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