17.01.2022

Gas production since the beginning of the year – 830 444 thcm

Weighted average price of natural gas (resource of January) – 40 253 UAH/thcm excluding VAT (100% prepayment terms)

TTF – 85.35 EUR/MWh ($1035) (+0.1%)

THE – 86.41 EUR/MWh ($1048) (+0.5%)

CEGH – 88.78 EUR/MWh ($1077) (+2.3%)

PEG – 85.10 EUR/MWh ($1033) (-0.1%)

November 2021. Monthly Gas Market Report

09/12/21

PRODUCTION

Ukraine produced 1.65 bcm of natural gas in November, which is 0.8% more than in November 2020.

JSC Ukrgasvydobuvannya (Naftogaz Group) reduced natural gas production almost by 2% compared to the same period last year. PJSC Ukrnafta along with independent gas producers keep increasing outputs of natural gas by 7.8% and 7.3% accordingly. Thus, over the past 7 months, the private sector has increased production by 114 million cm of natural gas, and it is forecasting that in 2021 the total production will reach 5 bcm, which will be an absolute record.

The share of state-owned enterprises in the total amount of gas production has not changed significantly since last month and was 74%, independent – 26%.
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PRICING

For the first time in the last 9 months, average monthly natural gas prices have fallen.

During the first week, the price fluctuated significantly in the range of 62.07-77.57 EUR/MWh ($750-937 per 1 000 cm), or 25%. On November 6-8, the price of gas remained unchanged at 73.11-73.18 EUR/MWh ($883-884). The second week was less unstable, but still with a slight reduction. However, during November 16-17, prices rose sharply, increasing by 28% or 20.49 EUR/MWh ($248 per 1 000 cm) and reached the highest value of the month. In the following days, the price fluctuated with a downward trend, that changed on November 30 to 93.11 EUR/MWh ($1 126 per 1 000 cm).

The difference between the lowest and the highest price of the month in November was 31.76 EUR/MWh ($384 per 1 000 cm), or 51%.

The average cost of natural gas at the TTF hub was 80.34 EUR/MWh ($971 per 1 000 cm), which means a decrease of 7% comparing to October 2021. Such price is of 487% higher compared to the same period last year, as the average value was 13.68 EUR/MWh.

The cost of natural gas at the TTF hub, including the cost of transportation to the Ukrainian border, in November, amounted to UAH 26 772 ($1 012 per 1 000 cm) net of VAT. It decreased by 8% compared to last month. During the same period in 2020, the price was UAH 5 966 ($211 per 1 000 cm).

Among the main reasons for price changes:

  • increase in gas supplies to Slovakia via Ukraine by Gazprom, which led to a collapse in prices,
  • forecasts of cooling, which restrained the fall,
  • suspension of the Nord Stream 2 certification process,
  • low gas reserves in European gas storages,
  • interruptions in the generation of RES, which led to more active use of traditional energy sources,
  • LNG shortage in Europe due to higher quotations in Asia,
  • news about the new strain of COVID-19 Omicron, which significantly affected price volatility.

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Bearing in mind, that the crisis at the world’s natural gas markets is primarily due to a shortage of resources, the market is monitoring the stages of Nord Stream 2 launch super carefully. As evidence, the sharp changes in prices of natural gas right after new information pops out. Moreover, knowing the fact, that the main characteristic of 20/21 years in instability, specialized organizations are constantly adjusting their forecasts, just because the situation is changing rapidly. For example, on November 16, 2021, the German regulator suspended the certification of Nord Stream 2 AG as the operator of the pipeline due to non-compliance under German law. Bloomberg, announced a possible delay in the certification until May 8. However, due to the crisis in the energy market, the situation may change radically at any time.

The Oxford Institute for Energy Studies has outlined three main scenarios towards the launch of Nord Stream 2, and here they are:

  • First scenario: the launch of Nord Stream 2 may start for a limited period on temporary terms during the winter 21/22 in order to mitigate the impact of the gas crisis on the European gas market,
  • Second scenario: the certification process will be accelerated by the German regulator BNetzA (Bundesnetzagentur für Elektrizität, Gas, Telekommunikation, Post und Eisenbahnen), the governments of Germany, and the EU, and gas supplies will start in winter 21/22 on a regular basis,
  • Third scenario: excludes gas supply during the winter of 21/22. Theoretically, if BNetzA, the German government, and the European Commission use all the time required by law for certification, or if there are technical problems with certification, gas supplies may not start until the summer of 2022. Under such conditions, the export of Russian gas through pipelines to Europe (excluding Turkey) will be limited by the amount of guaranteed capacity reserved (or available for booking) on existing gas pipelines, including 45.5 bcm of gas through Ukraine.

Price correlation in Ukraine during November continues to correlate with European trends.

According to the results of e-trading on UEEX on the 100% prepayment terms, the weighted average price in November amounted to UAH 27 434 ($1 037 per 1 000 cm) net of VAT, which is 25% more than in October 2021 and by 440% compared to November 2020.

The price of the resource of November in Naftogaz Trading for industrial consumers on the 100% prepayment terms increase by 2% compared to the previous month and amounted UAH 27 526 ($1 041 per 1 000 cm) net of VAT.

According to the Ministry of Economy, the import of natural gas to the territory of Ukraine in November was carried out at the average price of UAH 19 262 ($728 per 1 000 cm) net of VAT, which is more by 6% compared to the previous month.

DRILLING RIGS: UKRAINE AND EUROPE

According to the Association of Gas Producers of Ukraine, 39 drilling rigs were used in drilling in our country during November. This is more than 15 pcs. (+63%) compared to the same period last year and by 7 pcs. (+22%) compared to the previous month.

In Europe, 76 pcs. were used in production. This is an increase in drilling volumes using an additional 3 pcs. (+4%) compared to the previous month, but less by 1 pc. (-1%) by November 2020. Despite the fact, that France and Norway have reduced the number of active drilling rigs by 1 pc. (-50% and -6%), the rest of the countries offset this with their own growth. Among such countries: Italy by 2 pcs., Turkey by 2 pcs. (+9%), the offshore part of Great Britain by 1 pc. (+14%). The rest of the countries 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 November amounted to 1 552 pcs. This is 46 pcs. more (+3%), compared to October 2020, and by 478 pcs. (+45%) – to November 2020.

The United States continues to invest in the industry. Thus, in November the total number of active drilling rigs was 560 pcs., which is 22 pcs., more than the previous month and by 249 pcs. (+80%) compared to the same period last year. The following methods were used for drilling: directional – 34 pcs. (+22%), horizontal – 503 (+5%), vertical – 23 pcs. (-23%), other – 1 pc.

The total number of active drilling rigs in Canada was 167 pcs., which is 1 pc. More (+0.3%) to the previous month. Otherwise, compared to the same period last year, an increase by 72 pcs. (+76%) was recorded. The following methods were used for drilling: directional – 10 pcs. (+16%), horizontal – 153 pcs. (-1%), vertical – 4 pcs. (+33 pcs.).

The total number of capital investments equivalent to drilling rigs in Africa during November increased by 5 pcs. (+6%), compared to the previous month. That is also an increase to November 2020 by 21 pcs. (+33%). Hence, the total number was 84 pcs. Notwithstanding the fact, that most countries remained unchanged in their numbers or increased their performance – Nigeria was the only country with a slight reduction of rigs in by 2 pcs. (-22%). Among the countries that have used additional rigs: Algeria by 2 pcs. (+7%), Angola by 2 pcs. (+50%), Cameroon by 2 pcs, and Gabon by 1 pc. (+33%).
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In November, 195 active drilling rigs were used in the Asia-Pacific region, which is by 5 pcs. (+6%) more to the previous month and by 31 pcs. (+19%), compared to November 2020. This month, the situation in the region turned out to be ambiguous, as countries simultaneously increase/decreased their number, as well as some, remained unchanged. Thus, the countries that have increased drilling: Brunei by 1 pc., China at offshore by 4 pcs. (+11%), India by pcs. (+7%), and Malaysia by 3 pcs. (+75%). On the other hand, the list of the countries, that reduced active drilling rigs: Australia by 1 pc. (-5%), Indonesia by 3 pcs. (_11%), Thailand by 2 pcs. (-50%), and Vietnam by 1 pc. (-25%).

Latin American countries have traditionally increased the number of drilling rigs. Thus, 155 pcs, were involved in drilling in the region, which is more by 3 pcs. (+2%) to the previous month, and by 54 pcs. (+53%) compared to November 2020. Among the countries where growth was recorded: Argentina by 2 pcs. (+4%), Bolivia by 1 pc. (+25%), Colombia by 3 pcs. (+13%), and Ecuador by 3 pcs. (+43%). Countries, showed a decrease: Chile by 1 pc. (-50%), Mexico 1 pc. (-25%), Peru by 3 pcs. (-75%), Trinidad and Tobago by 1 pc. (-100%).

The total number of active drilling rigs in the Middle East was 2756 pcs., which is 1 pc. (+0.4%) more, than in October 2021, and by 37 pcs. (+15%) compared to November 2020. Most counties in the region have increased the level of capital investment in the industry, including: Egypt by 2 pcs. (+7%), Israel by 1 pc. (+50%), Kuwait by 3 pcs. (+14%), Qatar by 3 pcs. (+38%), Abu Dhabi (UAE) by 1 pc. (+2%), and Sudan by 1 pc. Only two countries have reduced the figures: Iraq by 2 pcs. (-4%), and Saudi Arabia by 8 pcs. (-8%).

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