(Bloomberg) — The trading arm of Russian gas giant Gazprom PJSC is under increasing pressure as customers and peers flee in response to the war in Ukraine, posing a risk to energy markets from the UK. United to Germany and Singapore.
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Gazprom Marketing & Trading is facing liquidity problems as banks delay their transactions and their peers refuse to deal with it, according to people familiar with the matter. But its failure would change markets beyond its UK domicile: the company is one of Europe’s leading gas and energy traders, has units in Asia and North America and has traded more than 100 cargoes of liquefied natural gas in 2020.
Little known to the general public, Gazprom Marketing & Trading has revenue almost on a par with the trading arm of Centrica Plc, the UK’s leading energy provider. If it closes, it would bring down its UK retail arm, a provider of the National Health Service. The threat is so acute that the government has made plans to nationalize the company, known as Gazprom Energy.
A unit in Germany is also at risk. The trading arm has billions of euros in hedges for Wingas GmbH, a sister company that is one of Germany’s largest gas providers, said the people, who asked not to be identified because the information is private. Losing these deals would force the Kassel-based company, owned by the German arm of Gazprom, to buy power for its customers at today’s high prices.
The backlash against Gazprom Marketing & Trading is happening even though the company has not been hit directly by Western sanctions. The UK this week included Gazprombank, which processes some energy deals, on its list of banned entities. While European countries, including Austria and Germany, have so far opposed oil and gas sanctions, traders fear the trade unit could be next.
Gazprom Marketing & Trading said it sources gas “on European wholesale markets in exactly the same way as other market participants, and since the first quarter of 2021 we have not received gas under long-term contracts with Russia.” Wingas declined to comment.
European energy markets have been extremely volatile, with gas prices rising as much as 79% in just one day earlier this month. The chaos would worsen if the company, with revenues of 2.6 billion pounds ($3.4 billion) in 2020, fails, potentially breaching deals and forcing customers into the market to buy gas and electricity at prices several times higher. higher than normal.
The LNG market would also feel the pinch. Gazprom Marketing & Trading has a subsidiary dedicated to marketing the supercooled fuel. As of 2020, that unit had an international portfolio of supply and purchase agreements, including deals to take cargoes from the Sakhalin Energy plant in Russia’s far east and Yamal LNG in the country’s Arctic. It is also the sole marketer of product from a floating liquefaction plant in Cameroon.
The LNG business traded 113 cargoes in 2020. For comparison, German utility giant Uniper SE handled 225 cargoes in the same period.
Gazprom Marketing & Trading also has units in Mexico, Switzerland, France, the United States and Singapore, according to data on its website.
Europe is devising urgent plans to reduce its dependence on Russian oil and gas as quickly as possible, no easy feat for a continent that has developed a heavy energy dependency on Moscow for decades. Many companies, including giants like Shell Plc and BP Plc, are also “self-sanctioning” by choosing not to sign new contracts for Russian supplies.
Only a few of Europe’s largest companies still do business with Gazprom Marketing & Trading on the OTC market. Banks sometimes take more than a week to process their transactions, which could turn off customers and business partners because it takes too long to close transactions. The company, which has more than 300 employees, is even being pushed out of its London offices by the owner, British Land Co.
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