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Gazprom cuts its share on European market

Citing CERA estimations, statements of competitors as well as its own data the Russian gas monopolist declared that its share on the market of European states and Turkey dropped to 26.3% in 2009 compared to 28.4% in 2008. The volume of sales of the companies competing against Gazprom on the European market saw an upward tendency. The share of Norway's Statoil stepped up to 18.5% in 2009 from 17.5% in 2008, while Qatargas's share advanced from 1.4% to 3.5%. However the share of Algeria's Sonatrach retreated from 9.9% to 9.6%. The 2.1% drop in Gazprom's share in Europe amounted to about $3bn in proceeds that were not received.

The figures are not really pleasant but one should not run to an extreme assessing them. The decline in Gazprom's share obviously does not mean that Europe is successfully implementing some plan on reducing its dependence on Russia's natural gas. Qatar's rising share looks big in percentage points compared to the initial standing of this Arab country on the European market, but the absolute volume of Qatari supplies is far from the size of Russian deliveries (even considering the planned launch of new LNG facilities) and it does not change the strategic layout of forces. Besides, Doha is unlikely to continue selling gas at relatively low prices; in reality it is looking forward to growth in spot prices, which should occur after the European economy overcomes consequences of the world economic crisis. Meanwhile, an increase in spot prices should raise the interest in Gazprom's piped gas sold on long-term contracts.

On the other side, the fact that Gazprom slipped on the European market should not be ignored. This is a really important signal testifying to continuation of at least two tendencies unpleasant for Russia. Firstly, Gazprom has really failed to find an adaptive line of behavior on the European market, including in the sphere of flexible pricing amid changes in the economic conjuncture. This leads to lower profits. Secondly, the desire of European states to use any opportunity to switch to any other supplier (e.g. Norway, Qatar) but Gazprom shows that Russian-EU relations suffer from a low level of trust and from mutual fears. The Europeans do not fear Statoil, but de facto they fear Gazprom, through they do not say this publicly. This moment should be taken into account from the point of view of long-term prospects of Russian-European relations in general.

By Stanislav Mitrakhovich, NESF leading expert


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