Gazprom Reverses Course on Gas Supplies to Russia's UES

Strategic Insights -

Gazprom has announced it will increase natural gas deliveries to Russia's utilities monopoly UES this year, reversing earlier statements by both companies that suggested the utility would have to reduce its gas consumption. The change in supply levels follows a meeting between the heads of the two companies, in which Gazprom's CEO Alexei Miller confirmed that his company would meet all contracted obligations to UES. The increased demand for fuel oil by UES has coincided with a significant rise in domestic fuel oil prices, hurting the utility's profitability.

Key Takeaways:

  • Gazprom expects to supply UES with the same level of natural gas this year as in 2005, according to a UES spokesman.
  • A Gazprom representative stated that the company could supply 3 Bcm more gas this year.
  • UES plans to make up for reduced gas supplies by increasing its consumption of fuel oil.
  • UES' fuel oil consumption increased by 35% from last year in January-August.
  • UES' coal intake increased by 9% in January-August.
  • Domestic fuel oil prices have increased by 85%.
  • Gazprom CEO Alexei Miller confirmed that his company would meet all contracted gas supply obligations to UES.
  • UES Chief Executive Anatoly Chubais and Gazprom's Alexander Ryazanov previously stated that gas supplies would be cut back to 2003 levels.

Statistics:

  • 3 Bcm: the potential increase in gas supply by Gazprom to UES.
  • 35%: the year-on-year increase in UES' fuel oil consumption in January-August.
  • 9%: the year-on-year increase in UES' coal intake in January-August.
  • 85%: the increase in domestic fuel oil prices in Russia.
  • 2005: the year UES' perceived gas supply levels are being matched.

Sources:

  • Nefte Compass (Aug.17, p6)
  • Nefte Compass (Sep.21, p5)