27.09.2021

Gas production since the beginning of the year – 14 455 636 thcm

Weighted average price of natural gas (resource of September) – 17 072 UAH/thcm excluding VAT (100% prepayment terms)

TTF – 68.26 EUR/MWh ($847) (+0.8%)

NCG – 68.11 EUR/MWh ($845) (+0.7%)

GPL – 68.43 EUR/MWh ($849) (+0.7%)

CEGH – 69.74 EUR/MWh ($866) (+1.3%)

August 2021. Monthly Gas Market Report

13/09/21

Association of Gas Producers of Ukraine presents monthly gas market report.

PRODUCTION

Ukraine produced 1.68 bcm of natural gas in August, which is 1.6% less than in August 2020.

JSC Ukrgasvydobuvannya (Naftogaz Group) reduced gas production by 4% compared to the same period last year. PJSC Ukrnafta along with independent gas producers were able to increase outputs of natural gas by 6% and 4% accordingly.

Thus, the share of state-owned enterprises in the total amount of gas production in July was 75%, independent companies – 25%, which entails no changes since the previous month.
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PRICING

Natural gas prices were rising 5th month in a row in August. As usual, the price of gas was slightly lower at the beginning of the month, but later on, it and was marked by traditionally high volatility, which indicates rapid changes in the market, as well as the willingness of traders to buy and sell quite more than usual. Thus. The price during the first week fluctuated in a range of 41-43 EUR/MWh ($510-533 per 1 000 cm), and the highest increasing for this period was 4.7% or 1.92 EUR/MWh ($24 per 1 000 cm). From here, prices went straight to the top and increased by 3.61 EUR/MWh ($45 per 1 000 cm) or 8.5% during August 8-12. After that, we’ve seen four days drop in prices, which didn’t break a wholesome tendency of growing. Thus, the highest price of the month was reached during 17th of August and amounted to 47.70 EUR/MWh ($595 per 1 000 cm), increased by 3.53 EUR/MWh ($44 per 1 000 cm) or 8% to the previous day. The situation on the market changed quickly, and two days later from this date, the lowest price of the month was reached and amounted to 40.07 EUR/MWh ($496 per 1 000 cm), decreased by 7.63 EUR/MWh ($95 per 1 000 cm), or 14%. From this moment forward, sharp volatility has decreased, and the prices went up consistently, increased by 7.56 EUR/MWh ($94 per 1 000 cm) or 15% during August 21-31.

Hence, in August, the difference between the lowest and the highest value of the month was 19% or 7.63 EUR/MWh ($95 per 1 000 cm).

The average cost of natural gas at the TTF hub in August amounted to 43.81 EUR/MWh ($546 per 1 000 dm), which means an increase of 22% compared to the values of the last month. Compared to August 2020, the growth amounted to 506%, as the average price for the same period was 7.23 EUR/MWh ($91 per 1 000 cm). Interesting fact, that the average monthly price of natural gas in August 2020 was so low, that equals the volatility of several days in August 2021.
The average price at the TTF Hub, including the cost of transportation to the Ukrainian border, in August, amounted to UAH 15 726 ($587 per 1 000 cm) net of VAT. It increased by 17% compared to July 2021.

Among the main reasons caused the biggest consequences on the market:

  • the decision of the Supreme Land Court of Düsseldorf against Nord Stream 2 AG, the operator of the Nord Stream 2 gas pipeline, to refuse to exempt the pipeline from the EU gas directive, which may lead to a restriction of 50% of the total volume of transportation,
  • automatic system error regarding the start of natural gas transportation by Nord Stream 2 through Lubmin II point and refutation by the Gascade operator of the information that there will be no commercial flows yet,
  • unplanned outages at one of the fields in Norway,
  • raising of the price of European carbon quotas,
  • a significant shortage of gas supplies from the Troll field (Norway),
  • signing of a 20-year contract for the supply of liquefied natural gas between PGNIG (Poland) and Venture Global (United States),
  • reduction of gas transportation to Poland via the Yamal gas pipeline due to the accident at the Gazprom plant,
  • rising LNG prices in Asia, which remains the main obstacle to LNG supplies in Europe.

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August 2021 was marked by a number of significant events that had a profound effect on pricing, as countries around the globe are preparing for the heating season, accelerating the pace of filling UGS. However, the situation in the hydrocarbon market in unprecedented, as high prices lead to a deficit. Asia, which needs more resources as it grows its economic potential, encourages traders from the United States to redirect LNG flows from Europe to themselves. According to Reuters, seasonal spot prices in Asia have reached historic highs since 2013. On the other hand, weather and post-epidemiological reasons during the summer led to a “demand boom”.

Rising resource demand in Latin America due to the impact of drought on Brazilian hydropower, air conditioning coverage in Bangladesh and Pakistan, and the replenishment of underground storage facilities since the start of the pumping season has reopened the market where players are willing to buy hydrocarbons at higher prices.

Price correlation in Ukraine during August followed the upward trend at European hubs and reflected rapid growth, even though they were still lower if it is compared.

According to the results of e-trading on UEEX on the 100% prepayment terms, the weighted average price in August amounted to UAH 9 970 ($372 per 1 000 cm) net of VAT, which is more by 7% compared to July 2021, and by 236% compared to August 2020.

The price of the resource of August in Naftogaz Trading for industrial consumers on the 100% prepayment terms, increased by 3% to the previous month and amounted UAH 12 658 ($473 per 1 000 cm) net of VAT.

According to the Ministry of Economy, the import of natural gas to the territory of Ukraine in August was carried out at the average price of UAH 11 457 ($428 per 1 000 cm) net of VAT, which is 18% higher compared to the previous month.

DRILLING RIGS. UKRAINE AND EUROPE

According to the Association of Gas Producers of Ukraine, 35 drilling rigs were used in drilling in our country in August, which is 3 pcs. (+9%) more that the previous month, and by 12 pcs. (+52%) more than the same period last year.

Growing natural gas prices finally affected Europe in terms of increasing active drilling rigs. Hence, its number has increased by 5 pcs. (+7%) to the previous month. The total number of rigs in drilling in August 2021 amounted to 74 pcs., which is still less by 2 pcs. or 3% compared to the analogical period last year. The decrease in activity was recorded in: Iceland by 1 pc. (-100%), Poland by 1 pc. (-33%), Turkey by 2 pcs. (-9%). The increase in activity was recorded in: Albania by 1 pc., France by 1 pc., Italy by 1 pc. (+100%), Norway by 1 pc. (+6%), Great Britain’s offshore by 4 pcs. (+67%) and Sweden by 1 pc.
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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 August amounted to 1 438 pcs, which is 56 pcs. (+4%) more, compared to the previous month, and by 398 pcs. (+38%) compared to the analogical period last year.

For the eleventh month in a row, the United States is increased drilling volumes, which involved a total of 501 rigs. Thus, in August, companies increased the number of active drilling rigs by 17 pcs. (+4%) compared to July 2021, and by 251 pcs. (+101%) compared to August 2020. The following methods were used in drilling – directional – 28 pcs. (-10%), horizontal – 455 pcs. (+4%), vertical – 18 pcs. (+7%).

Canada in also enlarging a volume of capital investment in the industry. Hence, the country involved an additional 11 active drilling rigs (+7%), and altogether showed a number of 156 pcs. Comparing to the same period of the last yeast, Canada demonstrates an increase of 103 pcs. (+195%). The following methods were used in drilling: directional – 4 pcs (no changes), horizontal – 148 pcs. (+8%), vertical – 3 pcs. (+15%).

The number of rigs involved in drilling in Africa is growing for the seventh month in a row. Their number was increased by 7 pcs. (+10%) to the previous month and by 13 pcs. (+21%) compared to the same period last year. The leader of the region in terms of capital investment in the industry – Algeria – managed to increase drilling by the equivalent of 3 pcs. (+14%). Countries where growth is recorded: Côte d’Ivoire by 1 pc., Nigeria by 4 pcs. (+57%) and Senegal by 1 pc. Countries, where on contrary, recorded a reduction: Ghana by 1 pc. (-50%) and Libya by 1 pc. (-7%). The rest of the countries remained unchanged.
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As the result of August 2021, the Asia-Pacific region demonstrates the total number of active drilling rigs as 198 pcs., which is 11 pcs. (+6%) more to the previous month, but by 2 pcs. (-1%) less, compared to the analogical period last year. Countries, where the decrease was recorded: Brunei by 1 pc. (-100%), Malaysia by 1 pc. (-20%), Thailand by 1 pc. (-20%). Countries, where growth was recorded: Australia by 7 pcs. (+37%), the offshore part of China by 2 pcs. (+6%), India by 1 pc. (+1%), Indonesia by 1 pc. (+3%), and Vietnam by 3 pcs. (+300%). The rest of the countries remained unchanged.

Latin America, despite the negative number of the last month, in August showed an increase by 4 pcs. (+3%) to the previous month, and by 63 pcs. (+84%), compared to the same period of the previous year. Hence, the most share of countries has shown an increase, such as: Bolivia by 1 pc. (+50%), Columbia by 1 pc. (+5%), Ecuador by 2 pcs. (+50%), Peru by 2 pcs. (+100%), Trinidad and Tobago by 1 pc. (+100%), and Guyana by 1 pc. (+25%). Instead, countries where the decrease was recorded: Argentina by 1 pc. (-2%) and Brazil by 3 pcs. (-33%).

The Middle East continues to stagnate with insignificant fluctuations for the region, where a total of 261 drilling rigs were involved, which is 2 pcs. (-1%) less compared to the previous month, and by 40 pcs. (-13%) compared to August 2020. Countries where drilling volumes have increased: Kuwait by 2 pcs. (+8%), Qatar by 1 pc. (+8%), Saudi Arabia by 1 pc. (+2%). The only country where the decrease was recorded was UAE (Abu Dhabi) by 6 pcs. (-14%). The rest of the countries remained unchanged.

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