LNG shipments to Europe give Russia’s Novatek a profit lift

Higher liquefied natural gas shipments to Europe helped Russia’s largest independent gas producer Novatek to a record net profit in 2022, even as state-controlled compatriot gas giant Gazprom moved in the opposite direction.

Novatek’s annual revenues of 805 billion rubles ($10.7 billion) were 10% higher than those reported in 2021, but net profit of 640 billion rubles was double that of a year earlier, according to earnings data reported by Moscow based news agency Interfax,

One of the factors driving the higher earnings was Novatek’s 50% stake in the Yamal LNG project in West Siberia.

The unprecedented increase in gas prices in Europe last year drew additional cargoes of Yamal LNG that had been expected to go to Asia, boosting returns.

In all, Yamal LNG sent close to 15 million tonnes of LNG to Europe last year out of total production reported at 21 million tonnes.

Novatek said its total natural gas production reached 82 billion cubic metres in 2022, up 3% against the previous year.

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By comparison, a report filed by Gazprom last Thursday stated that the company’s revenues rose by 25% to almost 8 trillion rubles ($107 billion) in 2022, but net profit tumbled more than 300% to just 747 billion rubles, compared with 2.7 trillion rubles in 2021.

Gazprom reported that its annual gas exports to Europe, Turkey and China totalled 101 Bcm in 2022 — down more than 45% from 2021 — while gas production declined by 20% to 413 Bcm year-on-year.

Slavneft and Tomskneft

Annual financial reports filed posted by Russian oil producing ventures Slavneft and Tomskneft also showed a big drop in profitability as costs spiralled as a result of the international sanctions imposed on Russia in response to its invasion of Ukraine. A sharp rise in the value of Russian ruble also reduced earnings from dollar-priced oil exports.

Financial reports by these Russian players have moved away from the international financial reporting standards (IFRS) that had become common for gauging the performance of Russian oil and gas producers against its Western peers, and were also widely used as a reference to determine the amount of dividends to be paid to shareholders.

Faced by Western sanctions introduced in the wake of the invasion of Ukraine last year, the Kremlin waived rules that had required oil and gas companies to make public disclosures of their consolidated financials in accordance with IFRS.

Oil producing venture Slavneft reported that a net profit fell of 537 million rubles last year, down from 1.1 billion rubles one year earlier. Slavneft’s revenues totalled $8.6 billion rubles in 2022, up 15% on a yearly comparison.

Another West Siberian venture, Tomskneft, reported a net loss of 18.7 billion rubles last year against a net profit of 4 billion rubles in 2021. This was despite a 12% increase in revenues, hitting a total of 183 billion rubles in 2022.

In 2021, Slavneft reported oil production of about 200,000 barrels per day while Tomskneft produced at the rate 115,000 bpd, according to the Russian Energy Ministry. The two ventures have not released their production figures for 2022.