NOVKY - PAO NOVATEK
| Previous Close | 163.80 |
| Open | 171.00 |
| Bid | 0.00 x 0 |
| Ask | 0.00 x 0 |
| Day's Range | 168.50 - 171.00 |
| 52 Week Range | 162.90 - 220.50 |
| Volume | 11 |
| Avg. Volume | 206 |
| Market Cap | 51.577B |
| Beta (5Y Monthly) | 0.44 |
| PE Ratio (TTM) | 9.55 |
| EPS (TTM) | 17.69 |
| Earnings Date | N/A |
| Forward Dividend & Yield | 4.47 (2.68%) |
| Ex-Dividend Date | Oct 08, 2019 |
| 1y Target Est | N/A |
- Bloomberg
A Way to Halt Natural Gas Flaring Arrives on the Back of a Truck
(Bloomberg) -- Perched on the back of a semi-trailer is the latest weapon in tackling the problem of wasted natural gas that oil producers often vent into the air or even burn off at the wellhead.Cryobox takes fuel directly from wells and turns it into liquefied natural gas, which is easy to store and transport.For small gas fields uneconomical or too distant to connect to a traditional pipeline network, this small-scale LNG plant is a solution to absorb fuel that would otherwise be wasted. That also makes it a way to prevent greenhouse gas emissions that contribute to global warming and solve a growing problem for the industry.Wherever oil is produced, gas often follows. If there aren’t enough customers to take it away, the gas is often treated as a waste product and either burned off at the wellhead or allowed to escape into the air—flared or vented in the jargon of the industry.Making LNG directly at the well can also help recover these supplies known in the trade as “stranded gas” when they aren’t economical to develop or lack pipeline connections. In North America alone, that stranded gas is worth about $600 million.Cryobox is a product of Edge Gathering Virtual Pipelines 2 LLC. It’s backed by a closely-held Buenos Aries compressor maker Galileo Technologies SA and Blue Water Energy LLP, a private-equity investor managing $2.5 billion.The Cryobox mobile LNG station is one of a growing number of systems that aim to reduce flaring and get gas to where it’s needed. Utilities and industry increasingly see it as insurance from events such as the gas shortage that caused some U.S. automakers to shut during last year’s brutal cold snap.“The solution is like an Uber for LNG,” said Thomas Sikorski, founding partner at Blue Water Energy, which is based in London. “Trucks with Cryoboxes can run back and forth.”Soaring gas output from Australia to Russia is inundating the global market, spurring creative solutions to exploit the surplus and help unlock new sources of demand for LNG.They vary from the basic—compressed natural gas delivered by trucks—to the more complex micro-LNG plants like Cryobox or another solution being built by Siemens AG. One company even installs data centers at shale sites, generating electricity from the surplus gas to mine Bitcoin.Such smaller-scale applications are growing. Novatek PJSC, Russia’s leading LNG producer, plans this year to start a project to convert mining industry trucks to the super-chilled fuel.“It’s a huge market opportunity for us,” Mark Gyetvay, chief financial officer of Novatek, said at a conference in Vienna. “These aren’t large-scale projects that are going to move the needle on the demand side, but these are the investments that can help create demand further downstream.”Edge’s Cryobox can produce as much as 15 metric tons (10,000 gallons) a day of LNG. The rig can be moved between wells and can be up and running within an hour of arriving on site. Peak production is reached in 10 minutes, which is much quicker than the 18 hours it takes for some big conventional liquefaction plants.The daily output of one unit is a tiny fraction—about one-3,000th—of large-scale plants in Qatar and Russia, but the focus is on the units’ portability. The small scale means the system makes sense for isolated pockets of reserves where it’s too costly to build pipelines and other infrastructure to collect flows. It addresses a growing problem for the industry.Shale wells produce mostly oil when they’re first fracked, but over time unwanted gas becomes a bigger part of the mix. Flaring rose to a record in Texas last year due to a lack of pipeline capacity to use the fuel.About 200 billion cubic meters of gas was flared or vented in 2018, more than Japan and China—the world’s biggest LNG buyers—import annually. Globally, 25% of associated gas is wasted, according to the International Energy Agency.Edge LNG is using its technology in the Marcellus shale in Appalachia, where there are 1,000 stranded wells, to truck LNG northeast. In the Permian Basin in western Texas and New Mexico, the excess gas may be used at drill sites to power machinery instead of costlier diesel, according to Edge LNG.By the end of the year, the company aims to have a total of 26 Cryoboxes deployed.“The business can triple in the next two-three years in the U.S. thanks to the huge growth in Permian,” said Edge Chief Executive Officer Mark Casaday. “Not only can the oil companies say they are reducing their cost, but they can say they are cutting their costs by reducing flaring.”Read More:LNG’s Dirty Secret: a Carbon Footprint Rivaling Coal QuickTake: The Shale Revolution Gas Shortage Idles Auto FactoriesTo contact the authors of this story: Anna Shiryaevskaya in London at ashiryaevska@bloomberg.netNaureen Malik in New York at nmalik28@bloomberg.netTo contact the editor responsible for this story: Reed Landberg at landberg@bloomberg.net, Andrew ReiersonFor more articles like this, please visit us at bloomberg.comSubscribe now to stay ahead with the most trusted business news source.©2020 Bloomberg L.P.
- Bloomberg
Russia Tried ‘Energy Dominance,’ and Markets Bit Back
(Bloomberg Opinion) -- Russia and Ukraine, locked in a decades-long bad marriage when it comes to natural gas, just agreed to extend the misery a little longer. The arrangement by which Moscow had the gas and Kyiv had the pipes worked fine when both flew the hammer and sickle; not so much since their nominal divorce, with Ukraine moving out and Russia ultimately trying to move back in.Geopolitical intrigue persuades even the most disinterested to take notice of energy markets. Yet, as a new history of the intertwined Russian and European gas industries shows, destiny is often shaped by the prosaic. There is plenty of drama in “The Bridge” by Thane Gustafson, an IHS Markit expert on Russian energy, from secret Cold War-era meetings in an Austrian castle to the tale of Ukraine’s former prime minister, revolutionary and one-time “gas princess,” Yulia Tymoshenko.The bigger story concerns a lower-key kind of revolution, chiefly in technology and economics. And it is one reshaping not just gas in Russia and Europe, but energy markets worldwide.The beginnings of the Russia-Europe gas “bridge” in the 1960s were complicated by the Iron Curtain, of course, but were, in commercial terms, pure vanilla. Russia needed money and technology (especially steel pipe and compressors) to develop its vast Siberian gas reserves, and the one market that could supply those things and also needed the gas was Western Europe. Early deals with Austria and, especially, the two Germanies had a barter-like quality. Which was just as well; in the absence of liquid energy markets, no one had a clue what the real “price” of gas was.Gas is different from oil because it’s much harder to transport or store. By and large, you need a physical link, usually a pipeline. Building these costs a lot, and bankers are more amenable if you show them a signed long-term contract. Typically, these were structured to price the gas as a function of oil — a liquid market — meaning the seller was exposed to some risk if oil prices fell. On the other side, the buyer committed to take or at least pay for a minimum quantity of gas, meaning they were exposed if demand fell. Everyone’s happy, more or less.Until they’re not. Besides the Berlin Wall, Ronald Reagan’s and Margaret Thatcher’s neoliberal tendencies took a pick-axe to the old gas bridge. By the early 1990s, just as Russia’s gas revenue was becoming “the mainstay of a failed state,” as Gustafson writes, ideas about shifting Europe’s energy markets away from vertical integration and opaque contracts toward choice and transparency began spreading eastward from the U.K., with Brussels just across the Channel. Gustafson chronicles the long battle undertaken by the European Commission — and especially competition heads Neelie Kroes and Margrethe Vestager — to break up the chummy club that was the Continental gas market and ultimately take on Gazprom PJSC’s long-term contracts. Ideology will only get you so far, though. What allowed the European Commission to assert its program was a mixture of time and technology. Since the 1960s, Europe’s isolated municipal gas networks had spread across the map like ivy, creating a continent-wide network. Networks — especially incorporating liquefied natural gas terminals — mean you aren’t beholden to one supplier and their steel umbilical cord. Add in the ability to trade gas in real time due to ever more powerful computing, and the building blocks are in place to create a liquid, competitive market with transparent pricing.Gazprom was understandably resistant to this sort of thing, preferring the certainties, relationships and, of course, leverage of the old bridge. It’s tougher to browbeat an anonymous hedge fund in London than a functionary in some eastern European gas ministry (just ask Belarus). That said, Gazprom adapted well in certain respects, such as building an international trading operation. Yet institutional resistance to change also left it flat-footed, particularly when it comes to LNG. President Vladimir Putin, whom Gustafson describes as “an energy geek,” saw reasonably early that LNG was the future, and he ultimately bypassed Gazprom in lending tacit support to the rise of independent operator Novatek PJSC.Geek Putin may be; mastermind would be a stretch. His strong-arm tactics via gas-supply cutoffs in 2006 and 2009 served mostly to push Ukraine further away, damage Gazprom’s reputation and, above all, demonstrate the energy weapon worked better back when customers were isolated, gas-hungry dependents rather than networked counterparts with options. Even Ukraine has loosened Russia’s grip, in part via dramatic declines in the country’s energy intensity.Putin is a fast learner, though. His championing of LNG, along with that recent tactical Ukraine deal and new pipelines to Germany, Turkey and China, demonstrate an understanding that one way to deal with the diversification of Russia’s biggest gas customer, Europe, is to diversify its own options. Even here, though, it is worth pointing out that efforts to build alternative export routes, such as the Blue Stream pipeline to Turkey, began before Putin’s ascent to power.For me, the most important line in “The Bridge” is where Gustafson notes that, despite Western Europe’s dwindling domestic gas production, its strengthened network provides greater security: “It matters less today who supplies the gas than that market forces create checks and balances.” This is a defining aspect of the transition away from the 20th century’s largely oligopolistic energy models. Rapid demand growth and the geographical inequities inherent to fossil-fuel resources favor suppliers. The rise of sophisticated networks, along with fuel-on-fuel competition and sheer conservation of energy, are changing that. There is a lesson in “The Bridge” for Washington, which, having spent decades successfully countering energy potentates by fostering liquid markets and efficiency, now seeks to exert raw power via its “molecules of U.S. freedom.” This is an anachronism in an age of networks, albeit one that reflects America’s seeming disenchantment with those networks.As for Russia, it’s adapting to the new commercial realities (and their impact on old geopolitical norms). Still, with hydrocarbons accounting for almost half the federal budget and the energy sector generating the lion’s share of export revenue, the country remains chronically under-diversified at an important level.And the world continues to move on, most importantly with respect to climate change. In a recently published critique of Moscow’s energy strategy to 2035 — sub-titled, tellingly, “Struggling to Remain Relevant” — the authors(2) observe that “the climate agenda is last and least in the order of priorities.” Yet it is this that presents an existential challenge to Russia’s energy income, regardless of this or that pipeline, with timing being the big variable. How Russia remakes itself for the energy transition is, thankfully, the subject of Gustafson’s next book project.(1) Tatiana Mitrova, director of the energy center at the Moscow School of Management-Skolkovo, and Vitaly Yermakov of the Oxford Institute for Energy Studies.To contact the author of this story: Liam Denning at ldenning1@bloomberg.netTo contact the editor responsible for this story: Mark Gongloff at mgongloff1@bloomberg.netThis column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.Liam Denning is a Bloomberg Opinion columnist covering energy, mining and commodities. He previously was editor of the Wall Street Journal's Heard on the Street column and wrote for the Financial Times' Lex column. He was also an investment banker.For more articles like this, please visit us at bloomberg.com/opinionSubscribe now to stay ahead with the most trusted business news source.©2020 Bloomberg L.P.
- Bloomberg
Putin’s Grand Gas Project Makes Sense Now
(Bloomberg Opinion) -- In the space of just a few momentous weeks, one of Russian President Vladimir Putin’s most ambitious projects — a Russian natural gas export system to match the new geopolitical reality rather than the Cold War-era one — has taken its final shape. It will probably last, without major change, until the end of Russia’s run as a top energy exporter. The finishing touches to the project, begun in 2001 with the construction of the Blue Stream pipeline to Turkey, include the launch of the Power of Siberia pipeline to China on Dec. 2, last week’s U.S. sanctions on the Nord Stream 2 pipeline to Germany, a new gas transit deal with Ukraine and the commissioning of the TurkStream pipeline, planned for January.External pressure and market circumstances have helped shape the new Russian gas export system so that it can’t really be used as a sinister tool of Putin’s rogue foreign policy. Meanwhile, it’s structured in a such a way that post-Putin Russia will still be able to maintain its energy market share and use it as a basis for useful trade partnerships. That makes it a positive part of Putin’s legacy, if not entirely thanks to Putin.Problems Inherited and Self-MadeRussia inherited contracts from the Soviet Union to supply natural gas to Europe, one of the biggest sources of hard currency for Russia’s reeling post-Communist economy. But the Soviet pipelines were laid across Ukraine and Belarus, which were part of the empire. But they became independent nations that demanded transit fees and low-priced energy supplies in exchange for maintaining Russia’s energy supplies to Europe, or rather, to its ex-Communist part, where Russia and everything that came from it were newly unpopular.At the same time, gas suppliers in Central Asia and Azerbaijan presented a competitive threat: It was relatively easy for them to pipe gas to Turkey, which could deliver it further to Europe.In the 2000s, when Putin and his advisers nurtured the notion of Russia as an “energy superpower,” it became clear to Kremlin strategists that they needed more flexibility to increase supplies and get more economic leverage over neighbors in Europe and Asia. Blue Stream, laid across the bottom of the Black Sea to the Turkish port of Samsun and opened in 2003, was the opening move of the Putin gas game.But Blue Stream’s capacity of 16 billion cubic meters of natural gas per year was dwarfed by the roughly 180 billion cubic meters the Soviet-built pipelines could export to Europe via Ukraine and Belarus. It helped Russia compete in Turkey, but didn’t solve the bigger problem of Russia’s dependence on Ukraine and Belarus. The share of European natural gas imports that came from Russia kept falling.In 2011, Russia obtained full control over the Belarussian gas transit system in exchange for discounted gas supplies. But Ukraine remained firmly in control of its pipelines, which accounted for the lion’s share of Russia’s export capacity.Putin wanted more direct access to southern and western Europe. He wanted to be able to bypass Ukraine, for both economic and political reasons. The Ukrainian pipeline system, run by National JSC Naftogaz Ukraine, was falling into disrepair, and Gazprom, the Russian export monopoly for pipeline gas, feared it might have to invest in fixing it without having much influence over its operation. At the same time, Putin wanted leverage over the Ukrainian government to keep it in Moscow’s orbit. Twice in the 2000s, Russia cut off gas supplies to Ukraine to try to bring it to heel, but without alternative export routes, such tactics were unsustainable.In 2012, Russia made another major move with the opening of Nord Stream, stretching across the bottom of the Baltic Sea to northern Germany. With a capacity of 55 billion cubic meters a year, it boosted Russia’s share of European imports. At the same time, Russia was planning a major pipeline to southern Europe, South Stream, across the Black Sea to Bulgaria. From there it would branch out to carry gas to Greece, Italy, Serbia and on to central Europe. The 2014 Crimea annexation made it imperative for Putin to redraw the gas export map. Now, Ukraine wasn’t just an inconvenient partner, it was an adversary, and bypassing it became a geopolitical necessity for Putin. Europe, too, was more worried than ever about increasing gas exports from Russia, which could use it to expand its political influence. The European Union scuppered South Stream in late 2014 by putting pressure on Bulgaria. Plans to expand Nord Stream by laying two parallel strings of pipe, known as Nord Stream 2, also became politically toxic, especially given U.S. resistance to that project: In Washington, fears of increased Russian leverage over Germany were compounded by the desire to supply more U.S. liquefied natural gas to Europe.Art of the PossibleThe way Russia altered its gas export plans in the last five years reflects a major shift in its geopolitical thinking. Putin’s anti-Western partnerships with key authoritarian regimes — those of Turkish President Recep Tayyip Erdogan and Chinese President Xi Jinping — had to be backed up with gas pipelines. At the same time, Putin wanted to maintain a lifeline to Germany, with its history of regime-agnostic Ostpolitik; Putin, a German speaker and a former Soviet intelligence agent in East Germany, sees Russia’s relationship with Europe as one with Germany first, even if Chancellor Angela Merkel is one of the continent’s least Putin-friendly leaders.So South Stream mutated into TurkStream, a pipeline with a planned capacity of 31.5 billion cubic meters running to the western part of Turkey, from where gas will flow to the Balkans. It was first filled with gas in late November, and Putin and Erdogan plan to inaugurate it on Jan. 8.The pipeline to China, Power of Siberia, which should be delivering 38 billion cubic meters of gas a year by 2024, opened early this month, with Putin and Xi watching via video link. It runs from Gazprom’s deposits in Eastern Siberia, too far from Europe for deliveries to make economic sense.At the same time, Russia has made a point of competing with the U.S. and Middle Eastern suppliers on the new and fast-expanding European market for liquefied natural gas. Novatek PJSC, a private company in which state-owned Gazprom is a minority shareholder along with France’s Total SA, started exporting from its enormous LNG facility on the Yamal Peninsula in 2018, and this year it approved a $21 billion investment in a second LNG plant. (Gazprom and Rosneft, another state company, have their own LNG capacity, but mostly for export to Asian markets). In the third quarter of 2019, Russia was the EU’s second biggest LNG supplier after Qatar, with 15% of imports; the U.S. was fourth, with 12% — although data from the U.S. Energy Information Administration show that the U.S. has overtaken Russia more recently.All these developments make it almost inevitable that Russian natural gas exports will keep increasing as spare production capacity keeps shrinking. Though vessels laying pipe for Nord Stream 2 and their owners have been sanctioned by the U.S., and Swiss contractor Allseas has suspended work on the project to avoid falling afoul of the U.S. government, that pipeline will be completed, too. Gazprom and one of its Russian contractors have pipe-laying vessels of their own. Though they’ll move slower than the bigger one provided by Allseas, Peter Beyer, the German government’s coordinator for trans-Atlantic issues, said in a radio interview on Monday that the government expected Nord Stream 2 to be operational in the second half of 2020. The delay has forced Russia to do a better deal with Ukraine than it would have been able to negotiate had there been no Nord Stream 2 sanctions. To replace the transit deal that runs out at the end of this year, Russia was trying to sign a mere one-year extension. Ukraine and the EU, which mediated the talks, were fighting for a 10-year contract that would spell out a minimum amount of gas for Gazprom to pump every year. Ukraine gets about $3 billion a year in transit fees from Gazprom, and it would develop a major hole in its budget without the funds.Russia agreed to a five-year deal with a minimum of 65 billion cubic meters to be supplied in 2020 (slightly less than this year’s projected imports) and 40 billion cubic meters in the following years. Both sides compromised on outstanding litigation that arose from the two countries’ previous tumultuous relationship as partners in the natural gas business. Gazprom agreed to pay Naftogaz the $3 billion it had won in an arbitration case, and Naftogaz agreed to drop lawsuits seek an additional $8 billion and to refrain from filing any others.Other compromises may have been reached, too. It’s been reported in Ukraine that Russia might resume direct supplies of gas for Ukraine’s own needs — something unthinkable under former Ukrainian President Petro Poroshenko’s government, when Ukraine was buying Russian gas in the EU rather than deal with the invader of Crimea. Russia is denying that direct supplies are part of the deal, but current Ukiraine president, Volodymyr Zelenskiy, is more pragmatic than Poroshenko was and eager to end the armed conflict Russia has instigated in Ukraine’s eastern regions. The new gas deal, described by the EU official who brokered it as a win-win solution for both sides, shows that Putin, with his transactional approach to foreign policy, values Zelenskiy’s willingness to bargain and compromise. As a result, Ukraine will remain an important pillar of the new Russian gas export scheme at least for the next five years. Though Putin didn’t originally want that, making every effort to establish gas supply channels that go around it, Russia’s resulting export system is remarkably balanced. It links Russia to China, Turkey, southern, northern and eastern Europe. All these markets are competitive, especially in Europe, where the EU has cracked down on Gazprom’s earlier attempts at monopoly pricing.Putin may have made and changed his plans for export channels in hopes of geopolitical leverage. This — and the big infrastructure contracts for Kremlin cronies that came with the pipeline buildout — helped justify the tens of billions of dollars invested in the pipeline and LNG projects. Gazprom’s capital expenditure has averaged $6.4 billion per quarter in the last five years, some 23% of the average quarterly revenue over the same period. The company has remained profitable throughout, but it has more than doubled its debt load since 2013, while revenue has increased by a projected 40% this year compared with 2014.Now that the infrastructure mostly is in place and the deposits needed to feed it are either online or coming online in the near future, the marginal cost of exporting gas will be relatively low, and Russia is guaranteed a solid export revenue stream in a fast-changing global gas market. That’s important for a country that exported $49.1 billion worth of natural gas in 2018 and collected some 7% of its budget revenues from the gas industry. Russia's export partners, of course, eventually move to phase out fossil fuels. That, however, won’t be happening anytime soon, as both Europe and China will need more gas as they replace coal. Russia is projected to account for around a third of the EU’s gas supply at least until 2040. Putin will be gone by then, but Russia’s energy trade will be more diversified than when he came to power. More benign Russian governments will be able to use it as a basis for good neighborly relations rather than as an instrument of pressure. The results of Putin’s grand project show how multiple players — Putin the ambitious authoritarian, his situational allies such as Erdogan and Xi, his adversaries such as the U.S., his reluctant partners such as the EU and his victims such as Ukraine — can combine efforts to build something worthwhile. To contact the author of this story: Leonid Bershidsky at lbershidsky@bloomberg.netTo contact the editor responsible for this story: Robert Burgess at bburgess@bloomberg.netThis column does not necessarily reflect the opinion of the editorial board or Bloomberg LP and its owners.Leonid Bershidsky is Bloomberg Opinion's Europe columnist. He was the founding editor of the Russian business daily Vedomosti and founded the opinion website Slon.ru.For more articles like this, please visit us at bloomberg.com/opinion©2019 Bloomberg L.P.
