Forbes ranks Gazprom second and Putin first

However, experts warn that the growing competition on the gas market could seriously affect the position of the Russian gas monopoly. To avoid this, Gazprom should seriously think about its marketing policy.

Why did Forbes’ analysts attribute the status of a ‘gray cardinal’ of the world energy sector to the Russian president? Gazprom is only the second world’s largest energy company, the first one is Saudi Aramco. Rosneft, Russia’s leading oil company takes the 15th place in Forbes’ rating. However, Director of the National Power Security Foundation Konstantin Simonov stresses that Russia has good positions both in the oil and gas sectors.

“Russia is a dominant player on the world oil and gas market, even though Saudi Arabia has outpaced us in oil production and the US has left us behind in gas production. Still, summarily, according to export figures and our role on the market, we are an influential player. Putin, as the head of the state, enjoys special attention.”

The expert believes that the Russian president’s charisma has influenced Forbes’ choice. Forbes preferred Putin to the Emir of Qatar and the King of Saudi Arabia, not to mention the shareholders of large US pension and investment funds. Konstantin Simonov says that they determine the state of the market of raw materials.

“They are very influential people. It is not Russia that determines oil prices, it is done by US pension and investment funds. These companies invest in oil futures and manipulate the oil price by alternately putting or withdrawing money and thus affecting the oil price. Forbes deliberately ignores these companies.”

However, Russian oil and gas companies had better think how to preserve their positions on the world energy market, rather than enjoy their current status. Experts are marking the dramatic growth of competition in the gas sector. If Gazprom does not respond to the market challenges in good time, its second rating could be endangered. Analyst Vitaly Krukov from the Kapital financial group says:

“New suppliers are entering traditional Russian markets with lower prices and more flexible conditions. They are mostly from The Middle East. Qatar dramatically increased deliveries of its liquefied gas to the European market after the economic crisis began. The US and Canada are also expected to start exporting liquefied gas. On the whole, the supply of gas in the world is growing.”

At present, producers of shale gas are becoming more aggressive. Some experts even talk about a ‘shale gas revolution’. Konstantin Simonov reassures that the cost of shale gas is rather high and only a small amount of shale gas is produced at present. This is more likely to be a topic for speculation. For example, Gazprom contractors actively played the shale gas card during talks on the revision of long-term contracts.

Still, Gazprom ought to prepare for serious changes on the market. According to numerous forecasts, the world consumption of gas will grow and so will the supply of gas. To preserve its leading positions, Gazprom will have to change its price policy. Our gas monopolist is accustomed to working on the basis of long-term contracts when the buyer guarantees the volume and price of purchases for long periods of time. This, in particular, simplifies investment planning. Experts believe that Gazprom will soon have to plan investment of its capital in the context of short-term contracts and dynamically changing prices.

By Vlad Grinkevich

The Voice of Russia, Jule 18, 2012