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The Merger of Gazprom and RAO UES and the New Gas and Electricity Pricing Patterns

The Merger of Gazprom and RAO UES and the New Gas and Electricity Pricing Patterns

Power industry reform is drawing towards completion. Despite the initial plans of its authors, we see that what’s coming is not as much reformation of the competitive market but rather emergence of a new gas&electricity giant that packs the strength of the gas monopoly and the vital importance of electrical power. Gazprom is already aggressively acquiring power generating units, following Aleksey Miller’s declared strategy to turn the gas company into a major energy corporation.

The main producer of energy feedstock is beginning to take over power producers and thus reshaping the fuel & energy industry of Russia. For Gazprom, this means new opportunities , for energy consumers – new risks. In the conditions of gas shortages in the domestic market Gazprom intends to pull off further reduction of gas consumption. During election wars and consequent political instability, the need to solve structure-related problems pales into insignificance and making competition for the country’s most important assets the only priority.

The new study by the National Energy Security Fund analyzes 
Gazprom’s expansion in the power segment:

  • Gazprom’s energy strategy

    • «The quest for assets»
    • Fighting for control of power business inside Gazprom

  • The problem of fuel supplies to power stations

    • Power units placement program
    • Long-term contracts
    • New pricing pattern
    • Risks for the economy of Russia

  • Acquisition of RAO UES’s assets

    • Gazprom’s financial difficulties
    • The patterns of cooperation with foreign companies
    • Gazprom’s struggle with other contenders for power generating units
    • Problems associated with the plans to take over SUEK

  • Forecast of further developments

    • The outlook on vertical monopolization of the power industry
    • The new gas and electricity pricing patterns

The content of the report:

Chapter 1. Gazprom's Strategy in the Power Industry. The Whys and Wherefores. Struggle for Control 2
1.1. Causes of Gazprom’s Expansion in the Power Industry 2
1.2. Gazprom’s Strategy in the Power Industry 6
1.3. Competition for Control of Electricity inside Gazprom 8
Chapter 2. Investments in Power Industry and Guarantees for Investors. Catering Fuel to Power Stations and New Pricing Pattern 11
2.1. Power Industry Development Stagnation. Where Do You Find Fuel and Money? 11
2.2. Gas Shortages and Increasing Domestic Demand: Obstacles to the Gas Scheme and to Construction of New Power Plants 15
2.3. New Gas Prices: Future Economic Growth 17
2.4. Long-Term Contracts in the Conditions of Monopolized Market 20
2.5. Difficulties in Synchronization of Gas Scheme and Commissioning of New Power Stations 22
Chapter 3. Acquisition of Assets and Gazprom’s Financial Hardships. Methods of Cooperation with Foreign Companies. JV with SUEK 25
3.1. What and How was Gazprom Buying in the Power Industry 25
3.2. Competition for Assets against Other Market Players: Chubais’s Small Victories 34
3.3. Acquisition of SUEK: Making Fuel Monopoly Stronger 39
3.4. Gazprom’s Financial Hardships 42
3.5. Power Industry Ambitions of the Gas Monopoly outside Russia 44
Chapter 4. Vertical Monopolization in the Power Industry: Benefits and Implications. Future Contour 45
Issue date November 12, 2007

If you are interested to obtain please contact » Elena Kim

Other issues:
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Special report:

Nord Stream 2 and Ukraine: Costs Should Decide
Shale Revolution: Myths and Realities
Liquefied Natural Gas Outlook: Expectations and Reality

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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