Fitch predicts Gazprom and US gas companies two years of non-profit operations

Fitch predicts Gazprom and US gas companies two years of non-profit operations

Fitch Ratings, an international rating agency, predicts two years of non-profit operation for Gazprom and US gas LNG companies. This was reported by the Russian economic information agency Prime.

Current prices on the global gas market barely cover the operating and transportation costs of both American gas companies and Gazprom, they will remain at current low levels in the next two years, the agency said.

In its base case scenario, Fitch downgraded the forecast for gas prices in 2020 at the largest European hubs TTF and NBP to $ 3.5 per thousand cubic feet (about $ 123.6 per thousand cubic meters) from $ 5.5 ($ 194.2 per thousand cubic meters) in the previous forecast.

The price forecast for the American hub Henry Hub has been lowered to $ 1.85 per thousand cubic feet ($ 65.3 per thousand cubic meters) from $ 2.5 ($ 88.3 per thousand cubic meters).

The Agency believes that gas prices will remain low in the next two years due to weak demand for LNG in China, large volumes of gas in European storages and the commissioning of new LNG facilities, albeit at a slower rate than in 2016-2019.

At the same time, long-term forecasts are more optimistic. “We assume that prices for the Dutch TTF hub and the British NBP will gradually recover to $ 5.5 per thousand cubic feet over three to five years, which generally corresponds to the full cycle costs of US manufacturers, including transportation to Europe and capital investments. In our opinion, the price of the Henry Hub in the USA will recover to the level of $ 2.5 per thousand cubic feet in the long term, ”the material says.

One must admit that even in this form, the scenario of the Fitch Ratings agency is rather optimistic, since this forecast does not fully take into account the impact of the new type of coronavirus pandemic on the world economy, which, apparently, is able to drive humanity into the Middle Ages. The world’s gas price will also be affected by the confrontation between the two oil giants of Russia and Saudi Arabia, since in many gas contracts the cost of “blue gold” is tied to the cost of “black” one. Moreover, this year, gas from the Caspian region should come to the European market via the Southern Gas Corridor. This is certainly not the best time to enter the market for which the gas giants are fighting, but no one could predict the appearance of the coronavirus. Or almost no one. In a word, in the next 2-3 years there will be no gas shortage in the world energy market, and in particular the European one, and supply will noticeably outstrip demand. Here, it would be more rational for the main gas suppliers to pursue a coordinated policy, following the example of OPEC, so as to “survive” until the time of “fat cows” without large losses. Although it must be admitted that, probably, today this is impossible. The main players in the global gas market have very polar interests.