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Gazprom after Crisis: What Dreams May Come

Gazprom after Crisis: What Dreams May Come

The crisis of 2009-2010 when because of a drop in demand and prices Gazprom for the first time under the management of Aleksey Miller found itself in a situation of a significant decline in incomes and a deficit of resources has formed a new gas reality. The corporation is to find a balance between ambitious, but economically ill-conceived projects and its post-crisis capabilities. These have not disappeared though.

Thus, Gazprom may expect a serious rise in earnings from supplying gas to the domestic market. The government, as was expected, has postponed transition to prices that generate the same profit margin as export until 2014, though, i.e. until after the “major election” period.

Export earnings have shrunk seriously in conditions of the European market (the key market for Russian gas) being oversupplied, but there is a good chance that demands for Russian gas will recover. Gazprom has to spend more and more money, though, not only on upstream projects like the launch of production on the Yamal Peninsula, but also on development of the gas supply system in the Far East or the construction of new export routes. Simultaneously, the monopoly has to endure considerable pressure and administrative competition from Novatek which has too serious administrative protection.

A certain lull in gas relations in the former Soviet republics is delusive, and smouldering controversies with suppliers from Central Asia and providers of gas transit to Europe can escalate at any moment. The prospect of gas supplies to the Chinese market arises as a counterbalance to the obstinate Europeans, but this path is full of risks, including pricing ones.

The report will elaborate on the following issues:

  • Gazprom on the eve of the election campaign

    • Changes of the tax system
    • Personnel stability and financial uncertainty
    • Reasons for putting off the liberalisation of gas prices in Russia
  • Production and transport projects

    • Prospects for the launch of Yamal, bypass gas pipelines, the Sakhalin-Vladivostok project; the status of offshore projects
  • The new role of “the independents”

    • A dramatic improvement to Novatek’s positions in the domestic market and real competition with Gazprom for export
    • The secrets of the company’s successes
  • The Gazprom export strategy

    • Gazprom vs. Europe
    • Scenarios to enter the Chinese market
    • The future of Russian LNG
    • When will the Atlantic open up?
  • Gazprom in the CIS

    • Ukraine and Belarus: the two summands
    • The problem of prices and transit
    • Calm in Central Asia
  • A medium-term forecast of developments

The contents of the report:

Introduction. 3
Chapter 1. Gazprom during Crisis 5
1.1. Production Infrastructure 5
1.2. Main Gas Projects: High Expenditure, Vague Prospects 7
1.3. Incomes and Investment 15
1.4. Growing Tax Burden with No Benefits 18
1.5. Hopes for Growth in Domestic Gas Prices 20
Chapter 2. Domestic Gas Market, Rise of Novatek 23
2.1. Liberalisation of Domestic Market 23
2.2. Rise of Novatek 25
2.3. Yamal LNG 28
2.4. Position of Independent Producers 29
2.5. Kovykta 32
Chapter 3. Gazprom in Former Soviet Union. Ukraine and Belarus: Two Summands. Calm in Central Asia 34
3.1. Gas Purchases. Minus Turkmenistan, Plus Azerbaijan 35
3.2. Gazprom and Ukraine: Disputes about Price and Pipe 40
3.3. Belarus: High Potential for Conflicts 42
3.4. Baltic States: In the Vanguard of Europe 44
Chapter 4. Storm in Foreign Markets 46
4.1. Gazprom vs. Europe 48
4.2. Gas Delivery 55
4.3. A America Still Closed 58
4.4. Asian Appetite. To China Again 60
Chapter 5. Possible developments 62
Date of issue: 6th December 2010


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