06.12.2021

Gas production since the beginning of the year – 18 297 232 thcm

Weighted average price of natural gas (resource of December) – 30 209 UAH/thcm excluding VAT (on all payment terms)

TTF – 89.96 EUR/MWh ($1076) (+0.7%)

THE – 90.64 EUR/MWh ($1084) (+0.6%)

CEGH – 91.26 EUR/MWh ($1091) (+1.8%)

PEG – 89.87 EUR/MWh ($1075) (+0.6%)

September 2021. Monthly Gas Market Report

12/10/21

PRODUCTION

Ukraine produced 1.64 bcm of natural gas in September, which is 0.2% more than in September 2020.

JSC Ukrgasvydobuvannya (Naftogaz Group) reduced gas production by 3% 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 8% accordingly.

Thus, the share of state-owned enterprises in the total amount of gas production in September was 74%, independent companies – 26%.
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PRICING

Natural gas prices are rising 6th month in a row. September is distinguished by a record increase, as the price has exceeded $1 000 per 1 000 cm. For the final time, close cost was recorded in March 2018 and amounted to $969 per 1 000 cm. This record was set at the end of the heating season due to the significant deterioration of the weather.

The price during the first week of September 2021 fluctuated in the range of 50-52 EUR/MWh ($624-656 per 1 000 cm), and the largest increase during this period was 4.7% or 2.34 EUR/MWh ($31 per 1 000 cm). During the second week, the price of natural gas rose sharply and increased in the period 8-14 September by 8.09 EUR/MWh ($96 per 1 000 cm) or by 15.1%. For September 14-16, the price increased by more than 9 EUR/MWh ($116 per 1 000 cm), but the next day, September 17, decreased by 12% or $109 to 61.8 EUR/MWh ($770 per 1 000 cm). This decline was soon offset and on September 21, the price rose by 13% or 8.29 EUR/MWh ($103 per 1 000 m3) to 73.45 EUR/MWh ($911 per 1 000 cm). Since then, there has been an average decrease of 5% until September 28, when the price increased by 10% or 6.68 EUR/MWh ($83 per 1 000 cm) to 74.94 EUR/MWh ($928 per 1 000 cm). In the following days, namely the trading day of September 30, the growth reached the highest value of the month and amounted to 81.88 EUR/MWh ($1 011 per 1 000 cm).

The difference between the lowest and highest price in September was 32.04 EUR/MWh ($387 per 1 000 cm) or 64.3%.

The average price of natural gas at the TTF hub in September amounted to 62.38 EUR/MWh ($778 per 1 000 cm), which means an increase of 42% compared to the values of the previous month. Compared to September 2020, the price increased by 462%, as the average value for the same period last year was 11.11 EUR/MWh.

The average cost of natural gas at the TTF hub in September, including the cost of transportation to the Ukrainian border, in September, amounted to UAH 21 895 ($819 per 1 000 cm) net of VAT. It increased by 39% compared to last month.

Among the main reasons for price fluctuations:

  • low level of UGS filling in Europe due to natural gas shortage in the market,
  • halt of LNG production at the Freeport export plant due to a power outage during the tropical storm Nicholas, as well as a stop of the LNG shipment from the United States as a whole,
  • news about Gazprom's refusal to book guaranteed capacity for transit through Ukraine,
  • downturn of the price of European carbon quotas,
  • Norway's plans to increase exports to Europe,
  • consistently high gas prices in Asia,
  • unscheduled technical work at Tarvisio point,
  • reduction of Russian gas supplies via the Yamal-Europe gas pipeline.

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High prices continue to create a shortage of hydrocarbons in the European market. Asia is increasing LNG imports and buying a resource that is consistently more expensive than Europe. On the other hand, the United States' export capacity for LNG is not enough to meet demand, which is holding back pricing at Henry Hub. In particular, reduction of electricity generation due to low wind gusts, as well as unplanned outages due to cooling, which affected the price, indicate the interdependence between the natural gas and electricity markets.
The situation in the world clearly confirms the fact that natural gas remains an essential element of security during the transition to clean energy and zero emissions, and also serves as a tool for balancing electricity markets in most regions.

Price correlations in Ukraine during September continued the trend at European hubs and reflected growth.

According to the results of e-trading on UEEX on the 100% prepayment terms, the weighted average price in September amounted to UAH 17 072 ($639 per 1 000 cm) net of VAT, which is 71% more than in August 2021 and in September 2020 – by 353%.

The price of the resource of September in Naftogaz Trading for industrial consumers on the 100% prepayment terms increased by 105% compared to the previous month and amounted to UAH 19 191 ($718 per 1 000 cm) net of VAT.

According to the Ministry of Economy, the import of natural gas to the territory of Ukraine in September was carried out at the average price of UAH 25 923 ($970 per 1 000 cm) net of VAT.

DRILLING RIGS: UKRAINE AND EUROPE

According to the Association of Gas Producers of Ukraine, 31 drilling rigs were used in drilling in our country in September. Such a number means a growth compared to the previous year by 9 pcs. (+41%), however, a drop to August 2021 by 4 pcs. (-11%).

Europe has shown a slight increase by 1 pc. (+1%) compared to the previous month. Thus, its overall quantity was 75 pcs., which is less by 5 pcs. (-6%) compared to the same period last year. Italy was the only country where the total number of drilling rigs was reduced by 1 pc. (-50%). On the other flip of a coin, France and Turkey increased capital investment activity equivalent to 1 rig, which means an increase by 100% and 5% accordingly. 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 September amounted to 1 448 pcs., which is 11 pcs. (+1%) more compared to August 2021 and by 441 pcs. (+44%) – to September 2020.

North America has gained significant harm due to recent hurricanes. Thus, the National Oceanic and Atmospheric Administration (NOAA) - the federal agency for meteorological and geodetic research in the United States, has reported 55 cases of oil emissions that are unprecedented over the past 10 years. According to the agency, Hurricane Ida had the greatest impact on offshore drilling.

However, the United States has been showing an increase in drilling for more than a year already, increasing the level of capital investment in the industry equivalent to 252 drilling rigs (+98%) compared to September 2020 and 8 pcs. (+1%) - until August 2021. A total of 508 active drilling rigs were used here in September. The following methods were used for drilling: directional - 16 pcs. (-43%), horizontal - 465 (+2%) and vertical - 27 pcs. (+48%).

Canada, in turn, reduced the rate of drilling new wells, using 153 active drilling rigs, which by 3 pcs. (-2%) less than last month, but by 93 pcs. (+156%) more than in the same period last year. The following methods were used for drilling: directional - 5 pcs. (+5%), horizontal – 144 pcs. (-3%) and vertical - 3 pcs. (+18%).

The number of rigs involved in drilling in Africa continues to grow for the eighth consecutive month. Therefore, their number in the region was increased by 3 pcs. (+4%) to the previous month and by 23 pcs. (+42%) compared to September 2020. The leader of the region in terms of capital investment in the industry - Algeria - increased its volumes by 2 drilling rigs (+8%). Gabon and Libya supported the growth trend by 1 rig or +33% and +8%. Instead, only Cameroon reduced its figures, using 1 drilling rig (-50%). The rest of the countries remained unchanged.
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In September, 194 drilling rigs were used in the Asia-Pacific region, which is 4 pcs. (-2%) less by August 2021, but by 25 pcs. (+15%) more than in September 2020. Countries where the decline was recorded: Australia by 1 pc. (-4%), the offshore part of China by 1 pc. (-3%), India by 2 pcs. (-3%) and Malaysia by 1 pc. (-25%). Instead, only Indonesia increased drilling volumes and used an additional drilling rig (+3%), with a total of 17 pcs., which is 77% more than last year.

Despite the instability of previous months, in September Latin America increased its performance by 2 drilling rigs (+1%) and had 140 pcs. involved in drilling. This is 69% more than in the same period last year. Countries where the decline was recorded: Bolivia by 1 pc. (-33%), Mexico 1 pc. (-2%) and Peru by 1 pc. (-25%). Countries where growth is recorded: Brazil by 3 pcs. (+50%), Colombia for 1 pc. (+5%), Ecuador per 1 pc. (+17%).

The Middle East had 269 drilling rigs involved in production in September, which is 8 pcs. (+3%) more than in August 2021, and became a record holder in the number of countries that increased drilling. So, among the following: Egypt for 1 pc. (+ 4%), Iraq by 2 pcs. (+5%), Israel for 1 pc. (+100%), Oman at 1 pc. (+2%), Qatar per 1 pc. (+10%), Saudi Arabia by 3 pcs. (+5%) and the UAE (Abu Dhabi) by 1 pc. (+3%). Kuwait became the only country that showed a decrease of 2 pcs. (-8%). The rest of the countries remained unchanged from the previous month.

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