According to Sberbank’s calculations, gas pipeline projects from Russia, Strength of Siberia, Nord Stream 2 and Turkish Stream will cost USD 93,4 billion together. The projects will not pay back to Gazprom, but they will provide lucrative contracts to the friends of the Russian president. One of the authors of the report has already been dismissed from work. This shows the political nature of the venture, writes Wojciech Jakóbik, editor-in-chief of BiznesAlert.pl.
According to analysts of Sberbank Alexander Facek and Anna Kotelnikova, who published a report on the Russian oil and gas sector in May, subcontractors like Arkady Rotenberg’s Strojgazmontaż and Strotransneftegaz, whose shares belong to Gennady Timchenko and his family, earn the most on these projects. These are people from the close circle of the President of the Russian Federation, Vladimir Putin.
Analysts indicate that bank loans for these investments bring low profits. – We recognize Gazprom’s decisions as completely understandable if it is recognized that the company is managed in the interest of its contractors, and not for commercial benefits – says the report.
The Rotenberg spokesman argues that his company will not be the main beneficiary of the Strength of Siberia, because after construction, the gas pipeline to China will remain under the management of Gazprom. Meanwhile, according to Sberbank, the project is more expensive than the alternative Altai Gas Pipeline, later called the Strength of Siberia 2. They recall that in 2010, the Chinese could sign a contract for Altai, which would not require additional infrastructure, as in the case of the Strength of Siberia.
The choice of the project that is being implemented now was to be dictated by the interest of subcontractors – Strojgransneftegaz and Strojgazmontaż. – The bigger the project, the more lucrative contracts – the authors of the report state. The strength of Siberia requires the development of extraction from the Chayandinskoe and Kovyktinskoye deposits for 20 billion dollars. For this, it is necessary to build a Amur gas processing plant for 14-20 billion dollars. NIPIGazpererabotka associated with Sibur is to operate in the facility, in which Gennady Timchenko also has part of the operation.
Sberbank analysts also question the economic advantage of the gas framework agreement with the Chinese CNPC for supplies of up to 38 billion cubic meters of gas annually along this trail. They point to the relationship between the pricing formula and the value of the oil barrel. At a price of USD 110, the contract was estimated at 400 billion dollars. Fake and Kotelnikowa calculated that the price of gas depends in 10-11 percent on the price of oil. This means that with oil for $ 60 gas will cost $ 6-6,6 per mmBtu. This means that even with an oil price of $ 65, the project will yield a return of $ 11 billion. It will be less than Gazprom has invested in the implementation of this venture.
According to Sberbank CIB, cases of the Turkish Stream and Nord Stream 2 will be similar. The first investments will amount to 20 billion dollars and in the second – 17 billion dollars. In the case of Nord Stream 2, it is more than USD 11,5 billion estimated in the past, due to the need to add accompanying infrastructure. Analysts say that Turkish Stream will not achieve profitability even in fifty years, and Nord Stream 2, assuming that it will be used even at 60 percent, will not pay back in 20 years.
Experts from Sberbank argue that Nord Stream 2 will not allow Russia to completely abandon supplies via Ukraine, which would save Gazprom and justify the construction of a new gas pipeline. This will only happen if deliveries to Europe have fallen by about 20 percent compared to last year’s levels. This would mean that without new contracts Nord Stream 2 will remain unprofitable. Kommersant’s interviewers argue that even after signing new contracts, the rate of return will be 7-8 percent.
In the face of these calculations, it can be concluded that Gazprom implements megaprojects commissioned by the Kremlin and against its own economic interests. The heir to the Ministry of Gas of the Soviet Union makes it possible to earn the closest to the Russian president Vladimir Putin. Some of them, like Gennady Timchenko, have been subject to Western sanctions for illegal activities in Ukraine. Is it worth to financially support projects like Nord Stream 2?
Meanwhile, Alexander Fak was fired from Sberbank. In recent months, he has published critical reports on Gazprom and Rosneft.