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Gazprom: breakout strategy

Gazprom: breakout strategy

Gazprom is under double pressure. It is becoming more and more difficult for the company to maintain a dialogue with the EU that perceives the gas giant as instrument of political pressure by Russia.

Ukraine is again on the agenda both as a capricious consumer and a shrewish transit state. Large independent gas producers continue attacking Gazprom on the domestic market; they are suffering from sanctions and count on expansion of their share on the Russian gas market as compensation.

Gazprom is looking for a way-out, including sharp intensification of its Eastern policy. The Russia-West confrontation made diversification of Russian exports to the Asia Pacific region not just urgent and desirable. This is the only possible strategy from the point of view of survival.

The question is about the scale and the pace of this process. The possibility that large-scale gas supplies to China will be carried out at the expense of exports to other directions is as high as never before.

However, Moscow still counts on restoration of partnership ties with Europe and preservation of the huge potential of mutually beneficial cooperation that has been accumulated over the past 40 years of Russian natural gas exports to Europe.

There are significant changes on the domestic natural gas market. The share of independent gas producers in the area of the Single System of Gas Supplies has already surpassed a 40% threshold, which leads to unprecedented decline in gas production by Gazprom amid stagnation on the market. Numerous systemic imbalances create risks for normal functioning of the Russian gas sector, which requires an extremely accurate approach of the state as regulator.

The sanctions have not directly affected Gazprom but its financial standing is influenced by a number of negative factors, e.g. non-payments by consumers and decreased export prices, as well as the necessity to increase investments in new large-scale projects.

Key topics of the report:

  • Gazprom and Ukraine: what comes next?

    • The “winter package”, preservation of transit risks
    • The essence of reverse supplies
    • Prospects of Ukraine as consumer of Russian natural gas
  • Gazprom in Europe

    • Transformation of the European gas market, Gazprom’s standing
    • Gazprom’s search for a new strategy in Europe
    • Changes in Gazprom’s exports
  • The course to the East

    • The first gas contract with China
    • Prospects of the “western route” of gas exports to China
    • LNG in Russia’s Far East, export ambitions of Rosneft
  • The domestic gas market at the crossroads

    • An optimal market model amid excessive capacities
    • The consumption dynamics
    • Price regulations, the launch of exchange trade
    • Debates about reforms in the Russian gas sector
  • Gazprom’s finances amid sanctions

    • Gazprom’s financial standing
    • Investment program The state fiscal policy
    • The state fiscal policy
  • The forecast of developments

Contents of the report:

Introduction 3
Chapter 1. Domestic gas market at crossroads 4
1.1. Gas balance in the Single System of Gas Supplies zone 4
1.2. Gas production: excessive capacities 7
1.3. Natural gas consumption: negative dynamics 13
1.4. Price regulation and other imbalances. Launch of exchange trading 16
Chapter 2. Gazprom and Ukraine: expectations 21
2.1. Ukraine’s natural gas balance on the eve of winter 21
2.2. Gas imports by Ukraine, reverse supplies 23
2.3. Reserves at underground gas storages, Ukraine’s unpreparedness for the winter season. “Winter package 27
2.4. Transit through Ukraine. South Stream, plans of Ukrainian GTS privatization 30
Chapter 3. Gazprom on foreign markets 34
3.1. Purchases and sales in former Soviet republics 34
3.2. Exports to the EU and Turkey 37
3.3. Suspension of South Stream 42
3.4. Gazprom in search for new strategy in Europe 47
Chapter 4. Course to the East: from possibility to necessity 51
4.1. First contract with China 51
4.2. Altai project 56
4.3. LNG in Russia's Far East, export ambitions of Rosneft 59
Chapter 5. Medium-term forecast of developments 61
5.1. Domestic market 61
5.2. Export strategy 62
5.3. Financial standing of Gazprom 63
5.4. HR policy 65
Date of release: December 31, 2014

If you are interested to obtain please contact » Elena Kim

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