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%)

October 2021. Monthly gas market report

10/11/21

PRODUCTION

Ukraine produced 1.7 bcm of natural gas, which is 0.5% more, than in October 2020.

JSC Ukrgasvydobuvannya (Naftogaz Group) reduced gas production almost by 2%, compared to the same period last year. Since July, the company has stabilized the downward trend: for 4 months it was reduced by 3%. PJSC Ukrnafta and independent gas producers continue to increase production by 4% and 6%, respectively.

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

In October 2021, natural gas prices continued to rise, but decreased at the end of the month.

The price in the first week fluctuated in the range of 86.71-114.29 EUR/MWh ($1 063-1 404 per 1 000 cm). During the trading day on October 6, the largest increase of the month to the previous day was recorded, which amounted to 30%. In the second week, the price of gas decreased at first, but later the situation normalized. Between 8 and 15 October, the level of volatility was almost 18% or 13.89 EUR/MWh ($170 per 1 000 cm). Similar changes were observed during the next week, as the price ranged from 84.94-100.39 EUR/MWh ($1 048-1 228 per 1 000 cm) or 18%. In the period from October 23 to 26, the price of natural gas was stable with slight fluctuations within 3%, but at the end of the month began to decline sharply. Thus, in the following days, October 29-31, the indicators reached the lowest value for the month and decreased by 12.45 EUR/MWh ($153 per 1 000 cm) to 61.89 EUR/MWh ($759 per 1 000 cm).

The difference between the lowest and highest price in October was 52.40 EUR / MWh ($645 per 1 000 cm), or 84.7%.

The average cost of natural gas at the TTF hub was 86.47 EUR/MWh ($1 063 per 1 000 cm), which means an increase of 39% by September 2021. Compared to October 2020, the price increased by 524%, as the average value was 13.85 EUR/MWh.

The price of gas at the TTF hub, including the cost of transportation to the Ukrainian border, in October, amounted to UAH 29 096 ($1 103 per 1 000 cm) net of VAT. It increased by 33% compared to the previous month.

Among the main reasons for price fluctuations:

  • gas shortage in European underground storages due to the start of the heating season,
  • high prices in Asia and Latin America, which may lead to risks of LNG supplies in winter,
  • forecasts for cooling,
  • shutdown of a number of enterprises in Europe due to high natural gas prices,
  • increase in supplies of the Yamal gas pipeline, which provoked a fall in prices,
  • increase in electricity prices, resulting in increased prices and demand for natural gas.

In October 2021, a new hub was launched - Trading Hub Europe (THE), which united two: NCG and Gaspool. Precise central location, as well as high German quality of service make THE one of the most liquid hubs in Europe.
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To overcome the energy crisis, the European Commission adopted a document ("Tackling rising energy prices: a toolbox for action and support"), which presented a set of rapid and medium-term measures. Thus, in Romania, a resolution was adopted to resolve the energy crisis, which defines a clear mechanism for compensation for consumers, the funds for which will be directed from the state budget. In France, by the end of 2022, it is forbidden to increase tariffs for households, reduced taxes for electricity and included the payment of funds to citizens.
The European Central Bank's forecasts for energy prices show that most EU governments are confident that gas prices will fall in 2022. The ECB considers that the rise in electricity, oil and gas prices is temporary and should ease.

Price correlations in Ukraine in October continued the trend in European hubs and reflected growth.

According to the results of e-trading on UEEX on the 100% prepayment terms, the weighted average price was UAH 21 943 ($832 per 1 000 cm) net of VAT, which is 29% more than in September 2021 and by 263% compared to October 2020.

The price of the resource of October in Naftogaz Trading for industrial consumers on the 100% prepayment terms increased by 41% compared to the previous month and amounted to UAH 27 011 ($1 024 per 1 000 cm) net of VAT.

According to the Ministry of Economy, the import of natural gas to the territory of Ukraine in October was carried out at the average price of UAH 18 063 ($685 per 1 000 cm) net of VAT, which is 25% more compared to the previous month.

DRILLING RIGS: UKRAINE AND EUROPE

According to the Association of Gas Producers of Ukraine, 32 drilling rigs were used in our country during October. This is 7 pcs. (+28%) more than in the same period last year and by 1 pc. (+3%) compared to September 2021.

In Europe, 76 pcs. were used in production. This is a decrease over the previous month by 2 pcs (-3%) and by 3 pcs. (-4%) compared to the same period last year. The decrease in activity was due to the reduction of offshore drilling in the UK by 3 pcs. (-30%), in Albania by 1 pc. (-100%), Iceland by 1 pc. (-100%). Countries where growth was recorded: Norway by 1 pc. (+6%), Romania by 1 pc. (+33%) and Turkey by 1 pc. (+5%). 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 October amounted to 1 505. This is more by 57 pcs. (+4%) compared to September 2021 and by 488 units. (+48%) - until October 2020.
The United States has shown traditional growth, as 538 drilling rigs have been used during the month. As a result, the level of capital investment in the industry was increased equivalently by 30 pcs. (+6%) to the previous month and by 258 pcs. (+92%) if compared with the same period last year. The following methods were used in drilling: directional – 28 pcs. (+75%), horizontal – 481 pcs. (+3%), vertical 29 pcs. (+9%).

The total number of active drilling rigs in Canada amounted to 166 pcs. This is an increase by 9% to September 2021, i.e., plus 13 pcs. Compared to the same period last year, the increase was recorded by 86 pcs. (+105%). The following methods were used in drilling: directional - 8 pcs. (+60%), horizontal - 154 pcs. (+7%), vertical - 3 pcs. (-2%).

The total number of active drilling rigs involved in Africa has hardly changed since September 2021. The countries of the region equally increased and decreased the level of capital investment, as a result of which the number of drilling rigs was increased by 1 pc. (+1%). Thus, their total number was 79 pcs, which is 25 pcs. (+46%) more than in October 2020. Countries where the decrease was recorded: Cameroon by 1 pc. (-100%), Gabon for 1 pc, Côte d’Ivoire for 1 pc. (-50%), Kenya for 1 pc. (-20%) and Nigeria by 2 pcs. Countries where growth is recorded: Algeria by 3 pcs. (+12%), Congo for 1 pc., Equatorial Guinea for 1 pc, Tunisia for 1 pc. and Niger for 1 pc. The rest of the countries remained unchanged.
In October, 190 drilling rigs were used in the Asia-Pacific region, which is 4 pcs. (-2%) less than last month, but by 20 pcs. (+12%) more compared to October 2020. The overall decline is due to decrease in drilling in Australia by 3 pcs. (-12%), India by 2 pcs. (-3) and Indonesia by 1 pc. On the other hand, growth was recorded in the offshore part of China by 1 pc. (+3%) and in Japan by 1 pc. The rest of the countries remained stable.
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Latin America continues to increase capital investment in the industry. Thus, 152 machines were used in drilling in the region, which means an increase of 12 pcs. (+9%) by September 2021 and 66 pcs. (+77%) until October 2020. Countries where growth is recorded: Bolivia by 2 pcs. (+100%), Brazil by 2 pcs. (+22%), Colombia by 2 pcs., Mexico by 7 pcs., Peru by 1 pc. (+33%). Countries where the decline was recorded: Trinidad and Tobago by 1 pc. (-50%) and Suriname by 1 pc. (-50%).

In October, the Middle East had 275 drilling rigs involved in new drilling, which is 6 pcs. (+2%) more than in September 2021, and 30 pcs. (+12%) compared to the same period last year. So, among the countries where there was an increase: Iraq by 3 pcs. (+7%), Saudi Arabia by 7 pcs. (+11%), UAE (Abu Dhabi) by 4 pcs. (+11%). Countries where, on the contrary, there was a decrease: Egypt by 1 pc. (-4%), Israel by 3 pcs., Pakistan by 1 pc. and Qatar by 3 pcs. (-27%).

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