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Gazprom in Internal, External Gas Markets: How to Share Gas ‘Pie’

Gazprom in Internal, External Gas Markets: How to Share Gas ‘Pie’

The position of Gazprom is quite controversial. On the one hand, after several years of decline in production because of a rise in competition in the domestic market and negative trends in foreign markets, Gazprom is again increasing gas production. It sets record after record in the European market as it meets additional demand.

The attacks of independent producers demanding reform of the industry or at least access to export by pipeline have been repelled once again. The company has got a certain respite.

On the other hand, political resistance to Gazprom in Europe only increases. The final battle for the position in the future European market is beginning.

The opponents are doing all they can to stop or slow down the construction of Nord Stream 2. Neither do the internal gas producers intend to give up. Besides, Gazprom’s financial position has seriously worsened.

All this makes the situation in the gas industry quite intriguing.

In our report you will find answers to the following questions:

  • What will happen to the domestic gas market?

    • The subject of domestic gas market reform remains a dominant one on the fuel and energy sector development agenda. The independents want to get access to the infrastructure and ideally, to have the transport and production divisions spun off from Gazprom. Victory in the 2017 battles does not mean victory in the entire war.
    • After the presidential election, the independents will inevitably mount a new attack.
    • What model of the domestic gas market will Russia switch to after all?
    • The report describes the current market situation; the successes and problems of the independent producers; the fight for regulated prices; and the development of exchange trade.
  • What awaits Gazprom’s export?

    • Gazprom has launched grandiose construction. Three new projects at once must be completed by the end of 2019: Nord Stream 2, Turkish Stream, and Power of Siberia.
    • Gazprom hopes to start gas supply by pipeline to China and keep the current level of export to Europe while changing its logistics. However, these plans have political opponents, and rivals in the same sector.
  • Does Gazprom have answers to its worsening financial position?

    • Major investment projects imply serious expenditure. One also has to take account of the relatively low gas prices in Europe and growth in the state-imposed tax burden. All this requires that the management take active measures to both attract foreign loans and improve spending efficiency.
    • We will check how the corporation copes with these challenges.
  • How has the balance of forces in the corporation’s top management changed and what is to be expected in the near future?

    • The report describes the fight in the export division and changes in the procurement system.

Contents of the report:

Introduction 4
Chapter 1. Staff Reshuffles, Management Reorganisation in Gazprom 5
1.1 Transformation of the export division 5
1.2 Engineering and the fight for procurement 12
1.3 The Board of Directors and top management 13
Chapter 2. Gazprom in Domestic Gas Market 15
2.1 Demand and pricing 16
2.2 A pilot project to liberalise prices 20
2.3 Exchange trade in gas: a one-person show 22
2.4 The fight for regulated prices 26
2.5 Development of gas supply and autogas 29
Chapter 3. External Markets: Time of Records, Decisive Battles for Transit 33
3.1 Gazprom in the European Union markets: towards new records 34
3.2 Gazprom in the Turkish market: leave to stay 38
3.3 Key gas transport projects 40
3.4 Gazprom in the former Soviet Union 48
3.5 The European Commission’s antimonopoly investigation 52
3.6 The fight for the liberalisation of gas export from Russia by pipeline 53
Chapter 4. Gazprom in the East: China Nearer and Nearer 55
4.1 An assessment of the Chinese market 55
4.2 Development of resources in Eastern Siberia and Yakutia and Power of Siberia-1 58
4.3 Amur Gas Processing Plant 62
4.4 Power of Siberia-2 and gas supply to China from Sakhalin 65
4.5 Expansion of Sakhalin-2 vs Far Eastern LNG 66
4.6 Pipeline Gas Supply to India, Japan, and South Korea 69
Chapter 5. Gazprom’s financial position: how to make both ends meet 71
5.1 Incomes lagging behind expenses 71
5.2 Gazprom’s capital investment and investment programme for 2016 and 2017 74
5.3 Dividend policy: a balance between the appetite of the government, the interests of investors, and growing investment 77
5.4 Tax pressure continues 80
5.5 Gearing rises but remains reasonable 82
Chapter 6. A medium-term forecast 88
Date of release: January 25, 2018

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Analytical series “The Fuel and Energy Complex of Russia”:

Outlook for Russian LNG Industry
Russian Energy and West One Year after Ukraine Conflict Began: Are There Connections Still?
Green Agenda in Russia during Bitter Conflict with West
After February 2022 the agenda was radically rewritten. Western companies began leaving Russia en masse, economic relations with the West were drastically reduced, and the Russian economy began to be pushed violently from the global economic space, hemmed in by sweeping sanctions. All that was, to put it mildly, not the best background for talking about ESG. Especially because tasks of survival and stability under unprecedented pressure became the priority in the economy. In late 2022, however, attempts to reanimate the ESG agenda already became obvious. The message is put across insistently that it is important to Russia regardless of the foreign policy situation. While earlier the “green pivot” was seen as an opportunity to attract Western investors and their technological solutions to Russia, now Keynesian reliance on domestic manufacture is discussed.
Oil and Gas Sector Regulation in 2022 and Prospects for 2023
Gazprom at the Forefront of Economic and Political Battles with Europe
Gazprom is being actively thrown out of the market. Its annual supplies to Europe have shrunk from the previous 150 billion to 65 billion cubic metres of gas. European officials assure that they have already learnt how to live without Russian gas, so they will bring its purchases down to but nominal values in 2023. Their main hope is liquefied natural gas. Today the EU must make a crucial decision: whether it has passed the point of no return in gas business with Russia and whether it is certain that its economy will endure without supplies of Russian pipeline gas. Or, on the contrary, Europe will realise after all that the gas balance will not be achieved and the payment for so headlong a rush for LNG will be disproportionate. Assessment of the potential volume of LNG that will appear on the market before the end of the current decade will be the most important factor for making the decision.

All reports for: 2015 , 14 , 13 , 12 , 11 , 10 , 09 , 08 , 07

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