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UPDATE 2-Russia's Gazprom expects gas exports to drop by 16% in 2020

(Recasts, adds detail)

MOSCOW, April 29 (Reuters) - Russia’s Gazprom expects its natural gas exports to decline by around 16% this year as the coronavirus crisis hit the global demand, a senior executive said on Wednesday.

The state-controlled gas company expects its exports, mainly to Europe, to fall to 166.6 billion cubic metres (bcm) in 2020 from around 199.2 bcm last year, Chief Financial Officer Alexander Ivannikov said.

The reduction shifts Gazprom further away from its long-term target of 200 bcm in gas exports to Europe, a key source of revenues for Gazprom.

The company is also targeting cost cuts of 140 billion roubles ($1.9 billion) this year, Ivannikov added.

It expects its average natural gas prices in Europe to fall to $133 per 1,000 cubic metres this year from $211 in 2019.

Earlier on Wednesday Gazprom, a lynchpin of Russia’s commodity-dependent economy, reported a fall in 2019 net profit to 1.2 trillion roubles ($16.3 billion), from 1.46 trillion roubles in 2018.

Its sales fell to 7.7 trillion roubles last year from 8.2 trillion roubles in 2018 as demand for Gazprom’s gas declined in Europe last year.

COVID-19 HITS DEMAND

The company has faced a sharp fall in natural gas demand this year due to the economic fallout from the global spread of the novel coronavirus.

Russia’s customs agency said Gazprom’s revenues from gas exports in January-February fell 51% year-on-year to $5 billion.

Gazprom expects European gas demand to start recovering from the third quarter, Renaissance Capital wrote earlier this month after a call with the Russian gas group.

Gazprom said investments for the Gazprom group, which includes oil division Gazprom Neft and power assets, were set at 1.6 trillion roubles for 2020 against more than 2 trillion roubles for 2019.

In December, the company started pipeline gas deliveries to China, a milestone for Russia’s plans to diversify commodities supplies away from Europe.

Gazprom said it had supplied China with 300 million cubic metres of gas in 2019 following the launch of the Power of Siberia pipeline. Gazprom plans to increase exports to China to 5 bcm this year and to 38 bcm by 2025.

$1 = 73.6625 roubles Reporting by Vladimir Soldatkin; Editing by Jane Merriman and Pravin Char

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