Read the original text at 112.ua.
Chairman of the Board of PJSC Gazprom Alexey Miller
In the world information milieu, we often face not only Freudian slips, but also Freudian bans. Though this phrase is not that nice-sounding but this is what it is. As you know, analyst of "Sberbank of Russia" Alexander Fek was dismissed from the analytical service of the bank on personal instructions of the chairman of the board of German Gref. Usually, analysts are fired for errors in forecasts.
But they do it quietly, no fuss, no muss. After all, a bad analyst is rather a dark stain on the bank's reputation, not a stain on his own suit. Banks are not accustomed to admitting that they made a mistake in their forecasts. But firing after public obstruction, and even with the blessing of the first is something unusual. At that moment, dozens of Ukrainian analysts happily exhaled – in Ukraine, it would work in another way. It is in this situation you begin to feel that "Ukraine is not Russia," as ex-president Kuchma used to say.
The report by Alexander Fek touches the tabooed issue for the Russian establishment - "Gazprom and its team", more precisely the plan for capital investments of the gas monopoly for the coming years. Russian analyst has quite clearly identified the main problems of infrastructure costs of the largest Russian company: economically unjustified (most projects do not develop new sales markets, but only improve the approaches to them); unprofitable: the payback period of various projects refer to the second half of the twenty-first century, when taking into account the industrial revolution 4.0. and the transition to the sixth-seventh technological order, the role of traditional hydrocarbons in the structure of the energy balance of the world economy could decrease significantly. In addition, the projects prepared by the analyst are non-transparent in terms of their implementation (the procedure for financing and selecting general contractors), and also politically motivated when only the naive presentation remains in the economy.
In fact, Fake's analytical report is a unique memo for various monitoring bodies, and it is not about the Investigative Committee, but about Western structures that fight against corruption and money laundering, especially in the European environment. As the analytical report showed, it is not about Gazprom itself, but rather about the conglomerate of its counterparties, including ultimate beneficiaries, who, as a rule, coincide with the participants in the Kremlin list.
At the moment, Gazprom has one basic external sales market (Europe) and a mythical reserve market (China). Let us start with the first one. Supplies of natural gas from Russia to European countries increased from 138 billion cubic meters in 2010 to 158 billion in 2015 and 178 billion in 2016.
The cluster of European consumers that have concluded contracts with Gazprom can be divided into two basic market segments. The first includes the countries of Western, Northern, and Southern Europe, including Turkey. Russians have delivered 156 billion cubic meters last year to this market, primarily to Germany (almost 53.44 billion), Italy (24 billion), UK (16 billion), Turkey (29 billion), France (12 billion), and Austria (more than 9 billion).
The second direction of supply is the countries of Central Europe and the Balkans. The capacity of this segment of the market amounted to more than 36.3 billion cubic meters in 2017, Poland (10.5 billion), Hungary (5.8 billion), Czechia (5.8 billion), Bulgaria (3,3 billion), Slovakia (4.6 billion).
At the moment, Gazprom has the following operating transit routes.
- Ukrainian GTS, with a planned capacity of 178 billion cubic meters, the actual load in 2016 amounted to 82.2 billion, or 46%.
- Belarusian route "Yamal-Europe", with a design capacity of 39 billion cubic meters, was loaded by 84% (32.9 billion).
- "Nord Stream - 1" in the form of two threads of 27.5 billion cubic meters. each. Loading amounts to 80%, or 43.8 billion.
- "Blue Stream" - 16 billion (by the passport) and almost 13 billion in fact (loading 81%).
In addition, two more projects are under development: "Nord Stream-2" with a planned capacity of 55 billion cubic meters and "Turkish Stream" (the Black Sea route), which will be able to supply more than 31 billion cubic meters.
As is known, as a result of the conflict with Ukraine and the judicial fiasco in Stockholm, Gazprom has become a zealous apologist for the well-known principle that "normal heroes always go around". Although the construction of bypass roads did not begin yesterday. Until 2012, the dependence of Russians on the Ukrainian route was critical for their national security, and there were no "Russian springs" up to this benchmark. For example, in 2010 Ukraine's share in the transit of Russian gas reached 70%. But with the launch of the "Nord Stream-1" in 2012, a transit hanging on the neck of Gazprom began to weaken, and this became the “prologue” to the first act of the tragedy.
Political engagement of the new projects drew the attention of analysts of "Sberbank", as well as their main performers. Stroygazmontazh of Arkady Rotenberg and Stroytransneftegaz of Gennady Timchenko became the largest contractors of Gazprom for the construction of new transit routes were the companies. In his report, Alexander Fek has rightly noted that the new transit routes do not open up new markets and are just an infrastructure for the supply of Russian gas to European consumers who are already “subscribers” of this system. Their only role is to exert political pressure on Ukraine.
The economic "expediency" of the new transit highways is especially bright in the analysis of "Power of Siberia," project for the supply of Russian natural gas to China. Initially, the Chinese offered to supply gas along the "Altai" route, and the cost of this project would be only $ 10 billion, but the Russians insisted on the other, more capital-intensive direction, explaining that in such a way, new fields will be developed. The estimate thus increased 5.5 times - up to 55.4 billion dollars. This project is beneficial to Gazprom's counterparties because it allows dividing a piece of the pie equally between the main contractors: $ 20 billion will go to the development of new Chayandinske and Kovykta deposits. In addition, it will be necessary to build the Amur GPP ($ 14 billion). At the same time, the project itself was tied to the cost of the oil basket: at the conclusion of the contract, a price of $ 100-110 was taken for a barrel. Now the fuel prices are much lower, therefore, the price of gas will also decline. In any case, the project will be able to reach the planned payback point (even if it is fully loaded) only if the price of oil exceeds 110 dollars per barrel within the next 10-15 years.
Meanwhile, according to Russian analysts, "the net present value (NPV) of this project will be negative and amount to about $ 11 billion." The calculation is based on the price of oil at $ 65.
In total, Gazprom provides 130 billion dollars for investment projects (a five-year program): 41% for the maintenance of existing facilities, 34% for the Power of Siberia, 14% for the Nord Stream-2 and the Turkish Stream. It is not difficult to see that with a comparable throughput, Gazprom's investments in the Siberian Power significantly exceed the similar costs for Nord Stream-2 and Turkish Stream. The proximity of Europe and its supervisory bodies play their role here, all the same, "capital-intensive" projects are "easier" to implement with the Chinese than with Europeans.
The conclusions of the Russian analysts were also supported by the Association of Professional Investors, which initiated an appeal to the government of the Federation with a proposal to increase the size of Gazprom dividends, arguing that it is better to pay shareholders and attract new investments in equity than to produce projects with payback in 2040-2050- and negative net present value.
This whole story is noteworthy for Ukraine for several reasons. First, our expert environment has not noticed Aleksei Kudrin's appointment as head of the Accounting Chamber of the Russian Federation. Former head Tatyana Golikova had to hurry away. Since the beginning of the 2000s, Alexei Kudrin has been the permanent head of the Ministry of Finance. He is the best Russian economist of the modern era and the author of the echeloned system of financial hedging in the form of the Reserve Fund and the National Welfare Fund. He also has the idea to limit the size of the oil and gas transfer (the number of oil revenues channeled to federal budget revenues) to a fixed percentage, as well as the oil and gas deficit (the number of oil revenues channeled to cover the federal budget deficit). Thanks solely to these measures, the Russian Federation was able to withstand Western sanctions and not slide into the abyss of the crisis. Today's coming of Kudrin to power is associated with a mega-scale project to return to his homeland the capitals of runaway elites, who cannot live in London and other Western capitals anymore. The owners of this money are offered to invest in federal bonds with a fixed yield that will allow them to bleach the funds invested in them.
The problem is that people who use this laundry are very skilled at counting money and they care about where they will be spent. That is why in the near future there will be an unofficial control over the system of state expenditures, including in the segment of budget-forming state companies. The Accounting Chamber under the leadership of Kudrin should become such a monitoring center. In any case, this is still the only representative of the Russian elite, credible for the West and within the business elite of the country.
That is why the reaction to the closed report of analysts has become so painful, because any leak of information can violate the consensus reached by the elites, and this is a very ephemeral thing. Criticism of infrastructure projects is now under an unofficial ban.
Ukraine could quite successfully adopt the experience of the Russian analysts. Counteraction to "Gazprom" is necessary, I mean, limiting its tentacles, that is, transit routes. And there is no reason to appeal to the “conscientiousness” of the German president. Berlin is not swayed by tears. We need effective investigations into the facts of corruption and abuse in the construction of bypass gas pipelines, and analytical studies on the effectiveness of Gazprom's investment. The lawsuits that Naftogaz is now filing concerning the seizure of Gazprom's property aimed at securing decisions of the Stockholm arbitration should be intensified in the countries bound to major transit projects: Germany, Turkey, and even China.
The only obstacle here is the affiliated ties of big Russian business among the current pro-governmental political elite of our country. In this case, any investigations can lead to the investigators. So, the only hope, paradoxically, should be pinned on the honest Russian analysts.