Russia's huge government owned Gazprom hopes to maintain its monopolistic status in the federation's gas industry.
But it will broaden its base by becoming a joint stock company in which almost all of the former Soviet Union's republics likely will become partners.
Centralized control over gas production and distribution is essential to Gazprom's efficient operation in Russia as well as its ability to provide fuel for other members of the Commonwealth of Independent States and foreign customers, said Rem Vyakhirev, Gazprom board chairman.
He noted that Gazprom has 53 trillion cu m (1.87 quadrillion cu ft) of gas reserves, by far the world's largest. It also has 140,000 miles of gas pipelines and almost 400,000 employees.
Natural gas accounts for about 54% of Russia's energy balance, an all time high not only for the republic but for anywhere in the world, according to Gazprom. In 1980, gas provided only 27.1% of the former Soviet Union's fuel on a BTU basis vs. 45.5% for oil and 25.2% for coal.
Gazprom includes Russia, Ukraine, and Belarus as founding members. But all other republics in the former U.S.S.R. except Turkmenistan have expressed their intent to become partners in Gazprom.
GAZPROM SYSTEM
Stockholding republics will "stand first in line" to receive Russian gas, Vyakhirev said. At present, Russia owns 89$ of Gazprom's fixed assets and almost all of its gas reserves.
But Vyakhirev, in a long interview with the Moscow newspaper Izvestia, pointed out that Gazprom depends on Ukraine for much of its supply of large diameter pipe and gas compressors. In addition, major C.I.S. gas industry research institutes are in Ukraine.
Gas produced in Russia and sold to eastern and western European countries must be delivered by pipelines crossing Ukraine or Belarus.
"Our gas distribution system is shaped in a way that makes it simply impossible to divide it according to the borders of C.I.s. member nations," Vyakhirev said. "The average length of a gas trunk line in the former U.S.S.R. is 3,500 km (2,174 miles).
"Gazprom's entire distribution system, especially exports, depends on Ukraine and Belarus. As long as we have a unified transmission system, we have the flexibility to direct hundreds of millions of cubic meters of gas where needed in keeping with demand caused by changing weather conditions.
"The bigger the system, the greater is our ability to maneuver. If we tried to carve up the system, even Russia, with its enormous gas reserves, would simply not be able to meet its own gas needs."
Vyakhirev said Gazprom has accidents, including major ones, that are not always disclosed to the public. The effect of those breakdowns, he asserted, can be minimized by a large integrated transmission system.
UNIFIED SYSTEM
Gazprom foresees a unified European gas distribution system extending from western Siberia's Yamal Peninsula to the Atlantic Ocean.
"This will increase the dependability of gas supply in all of the participating nations," Vyakhirev told Izvestia. He added that Gazprom, "considering our unique experience, won't play second fiddle in such a setup."
Until recently, Izvestia noted, Gazprom was not permitted by the government to sell its gas in the West. As a result, it said, most profits from the sale of Soviet gas went to middlemen, companies that sold the gas to consumers from twice as much as the wholesale price paid to the U.S.S.R.
"Recently," the paper said, "Gazprom, with the help of BASF and its affiliate Wintershall AG, penetrated the German market and apparently plans to build distributions pipelines there."
Izvestia asked Vyakhirev if this was a one-time deal affecting only Germany or whether it is a precedent for similar activity in other western markets.
The Gazprom chairman replied that in the past the Soviet Union was merely a gas supply appendage to western Europe's economy.
"But we don't want to continue to operate with outstretched hands, begging for hard currency from either our own government or the West. We will earn the money ourselves.
"The western press is noisily complaining that Gazprom is violating the decades-long monopoly held in their market by giants such as Shell and Esso. I emphasize that we have nothing against these prestigious companies. If western firms want to cooperate with us, we are prepared to work with them on an equitable basis.
"Let's build pipelines and trade together."
VIEW ON PRICES
Domestically, Vyakhirev said, Gazprom does not favor uncontrolled gas prices. His firm wants the government to increase gas prices gradually to commercial users to Gazprom can make a profit.
But Vyakhirev stressed that gas prices should not be raised substantially for the general population.
"The social consequences of a sharp price hike to ordinary citizens could lead to an explosion of dissatisfaction that would be much more dangerous to us than direct revenue losses," he said.
Copyright 1992 Oil & Gas Journal. All Rights Reserved.
