US LNG, Novatek, the weather cause Gazprom to cut production

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Gazprom PJSC forecasts a conservative natural gas production outlook for 2019, based on warm weather and growing competition from Russian-piped super-chilled fuel.

“We plan to produce 495 Bcm of gas this year,” deputy CEO Vitaly Markelov said in an interview to Gazprom’s in-house publication, excerpted by Bloomberg. Markelov was reiterating a conservative forecast the company’s executives made in February.

Though Gazprom has traditionally dismissed the potential impact of LNG cargoes from the U.S. on its position in Europe, Elena Burmistrova, head of Gazprom’s export arm, was quoted in February as saying that North American supplies are “worrisome.”

In addition, Gazprom has unexpectedly faced competition in Europe from a domestic rival, Novatek PJSC. The independent gas producer, which started output at its LNG facility in the Arctic in 2017, became a major supplier of LNG to northwestern Europe during the past winter after prices in Asia dropped

Returning to the Markelov interview, Bloomberg notes that annual volume projected would mark Gazprom’s first drop in output in five years, from 497.6 Bcm in 2018. The energy company revises its output plans several times a year based on demand in Europe, its largest market. The region currently has plenty of gas in storage after a warm winter reduced consumption.Gazprom last week estimated that European gas storage facilities are 42% full and said that purchases to replenish the stocks “will be significantly lower than in previous years.” While the company’s gas production from Jan. 1 through April 15 rose by 2% year on year, its exports to Europe and Turkey dropped 9%.

An influx of liquefied natural gas supplies to Europe is adding to the pressure, VTB Capital oil and gas analyst Ekaterina Rodina said.

Source: Bloomberg