Gazprom faces growing pressure to change, experts say in report

Changing global natural gas markets may compel Russia’s state gas company Gazprom to dramatically change, two Washington observers suggested, but the changes won’t be easy, and will take time, they said during a seminar at the Atlantic Council.

Gazprom will have to address not only increasing antagonism with its European customers, but also growing competition from US LNG exports, Caspian basin production, and independent and other producers within Russia, according to David Koranyi, deputy director of the council’s Patriciu Eurasia Center, and Adnan Vatansever, a senior fellow specializing in Eurasian Energy Futures at the council.

Their conclusions were featured in a recent Atlantic Council issue brief, “Lowering the Price of Russian Gas: A Challenge for European Energy Security,” which was released at the Mar. 26 seminar.

Europe’s supply security concerns, especially that Russia might interrupt supplies for political reasons, appear overstated, Vatansever said. Price matters more, especially in eastern Europe, and Gazprom will have increasingly less room to maneuver because it has emphasized development of more prolific, higher-cost reserves, he suggested.

The company still has a monopoly on gas exports by pipeline, but faces growing competition from Rosneft and other Russian producers in LNG exports, Vatansever said. The Russian government also could increase Gazprom’s extraction and export taxes as the country’s oil fields deplete and more expensive gas begins to be produced, he added.

‘No longer untouchable’

“Gazprom’s relationships in its home country have changed in the last 3 years,” Vatansever said. “It’s no longer untouchable, even though it subsidized housing and other sectors over the years. Independents and other Russian gas companies have increased their production as Gazprom’s has declined, making it a swing producer. Rosneft and other newer companies have political support, suggesting that big changes lie ahead for Gazprom.”

Koranyi maintained, “The challenge will be to create mutually beneficial interdependence. Both sides will need to overcome several psychological barriers.”

The European Union will have to finish its gas market integration, which is behind schedule; diversify its sources; and complete its antitrust investigation of Gazprom, he said. “Finally, shale gas exploration and production in certain European states must be facilitated if it’s to replace declining Russian production and exports,” Koranyi said.

Russia also should quit attacking shale gas as environmentally risky and start looking more closely at its own shale gas potential, he indicated. “Producing it might prove to be a more economical solution,” he said.

Vatansever said Norway’s Statoil, which is Gazprom’s biggest competitor in western Europe, has been using prices linked to spot markets while the Russian firm has stayed with oil-indexed pricing. “This matters more in eastern Europe, which has hardly any other alternatives, than in countries further west,” he said. “I don’t expect Gazprom to abandon this pricing approach until it’s absolutely necessary.”

Contact Nick Snow at nicks@pennwell.com.

Related Articles

EPA approves Magellan’s Corpus Christi splitter project

12/12/2014 The US Environmental Protection Agency has issued a final greenhouse gas prevention of significant deterioration construction permit to Magellan Pr...

Keyera to take majority interest in Alberta gas plant

12/12/2014 Keyera Corp., Calgary, will pay $65 million (Can.) to buy a 70.79% ownership interest in the Ricinus deep-cut gas plant in west-central Alberta.

PBF Energy, PBF Logistics make management changes

12/12/2014 Matthew Lucey, currently executive vice-president of PBF Energy Inc., will succeed Michael Gayda as the company’s president. Todd O’Malley, current...

TAEP: TPI still peaking, but ‘contraction unavoidable’ as oil prices fall

12/12/2014 The Texas Petro Index (TPI), a composite index based on a comprehensive group of upstream economic indicators released by the Texas Alliance of Ene...

MARKET WATCH: NYMEX crude oil price extends slump

12/12/2014 Crude oil prices extended their slump on the New York market with a Dec. 11 settlement of less than $60/bbl for January, and prices continued downw...

US needs more data before ending crude export ban, House panel told

12/11/2014 Much more environmental impact information is needed before the US can reasonably remove crude oil export limits, a witness told a House Energy and...

BOEM raises offshore oil spill liability limit to $134 million

12/11/2014 The US Bureau of Ocean Energy Management increased the liability limit for oil-spill related damages from offshore operations to $134 million from ...

Rosneft, Essar sign terms of oil supply agreement

12/11/2014 OAO Rosneft and Essar Energy PLC have signed key terms of an oil supply agreement in New Delhi. Rosneft said shipments to India may begin in 2015.

Barton introduces bill to remove US crude export limits

12/11/2014

US Rep. Joe Barton (R-Tex.) introduced legislation that would remove US crude oil export limits that have been in place for nearly 40 years.

White Papers

AVEVA NET Accesses and Manages the Digital Asset

Global demand for new process plants, power plants and infrastructure is increasing steadily with the ...
Sponsored by

AVEVA’s Approach for the Digital Asset

To meet the requirements for leaner project execution and more efficient operations while transferring...
Sponsored by

Diversification - the technology aspects

In tough times, businesses seek to diversify into adjacent markets or to apply their skills and resour...
Sponsored by

Engineering & Design for Lean Construction

Modern marketing rhetoric claims that, in order to cut out expensive costs and reduce risks during the...
Sponsored by

Object Lessons - Why control of engineering design at the object level is essential for efficient project execution

Whatever the task, there is usually only one way to do it right and many more to do it wrong. In the c...
Sponsored by

Plant Design for Lean Construction - at your fingertips

One area which can provide improvements to the adoption of Lean principles is the application of mobil...
Sponsored by

How to Keep Your Mud System Vibrator Hose from Getting Hammered to Death

To prevent the vibrating hoses on your oilfield mud circulation systems from failing, you must examine...
Sponsored by

Duty of Care

Good corporate social responsibility means implementing effective workplace health and safety measures...
Sponsored by

Available Webcasts


On Demand

Optimizing your asset management practices to mitigate the effects of a down market

Thu, Dec 11, 2014

The oil and gas market is in constant flux, and as the price of BOE (Barrel of Oil Equivalent) goes down it is increasingly important to optimize your asset management strategy to stay afloat.  Attend this webinar to learn how developing a solid asset management plan can help your company mitigate costs in any market.

register:WEBCAST


Parylene Conformal Coatings for the Oil & Gas Industry

Thu, Nov 20, 2014

In this concise 30-minute webinar, participants have an opportunity to learn more about how Parylene coatings are applied, their features, and the value they add to devices and components.

register:WEBCAST


Utilizing Predictive Analytics to Optimize Productivity in Oil & Gas Operations

Tue, Nov 18, 2014

Join IBM on Tuesday, November 18 @ 1pm CST to explore how Predictive Analytics can help your organization maximize productivity, operational performance & associated processes to drive enterprise wide productivity and profitability.

register:WEBCAST


US HYDROCARBON EXPORTS Part 3 — LNG

Fri, Nov 14, 2014

US LNG Exports, the third in a trilogy of webcasts focusing on the broad topic of US Hydrocarbon Exports.

A discussion of the problems and potential for the export of US-produced liquefied natural gas.

These and other topics will be discussed, with the latest thoughts on U.S. LNG export policy.

register:WEBCAST


Careers at TOTAL

Careers at TOTAL - Videos

More than 600 job openings are now online, watch videos and learn more!

 

Click Here to Watch

Other Oil & Gas Industry Jobs

Search More Job Listings >>
Stay Connected