Analyst Alexander Pasechnik — on export prospects of “Gazprom” in Europe
The main result held in early October, the VI St. Petersburg international gas forum was the meeting the head of “Gazprom” Alexey Miller, representatives of partner companies (Engie, OMV, Shell, Uniper and BASF/Wintershall) on the construction of the gas pipeline “Nord stream-2”, which promised to continue to contribute to the development of the project and outlined the strategic interest of the Old world for Russian gas.
The growth of demand for Russian gas is a trend that persists in Europe. In particular, according to preliminary data, from January 1 to October 3, 2016, the export of gas from Russia to Germany (the largest European consumer of “Gazprom”) exceeded the figure for the same period in 2015, almost 2 billion cubic meters. And the growth of supply of “Gazprom” in Germany in September 2016 in relation to the September 2015 amounted to 23%. Miller predicted that Gazprom will set a new record in volumes of export to Germany at the end of this year.
In addition to building a strategy for the sales gas network “outside the perimeter”, “Gazprom” in parallel develops and projects for liquefaction. Today plans to expand exports of liquefied natural gas (LNG) for Russian companies retain a high relevance in the medium term. And the potential of this segment of the gas market is still very attractive, forward-looking assessment.
Last week it became known that the new project of Gazprom LNG — Baltic LNG — can obtain the right for independent export. This was achieved in the negotiations with the Russian side, the foreign partner — the Anglo-Dutch Shell. As a result, the company will be free to sell Russian gas abroad, provided the refusal to supply the markets of Gazprom in Europe. In addition, the “Baltic LNG” claim additional tax benefits, and Shell wants to expand participation in the project by obtaining your own oil production capacity in Russia and to become a supplier of raw materials for the plant.
Brake of this project are the U.S. economic sanctions. And Shell, despite the initiative, still acts with political caution. However the other day the two heads of the companies — Alexey Miller and Ben van beurden, has already signed a Memorandum on marketing model of the project. In this case one of trading structures Shell will be able to buy the gas under long term contracts in your portfolio and then to contract it. This scheme was practised for example in the framework of the project “Yamal LNG”, the potential gas which is already painted to consumers for many years to come.
The trend to increasing global supply of LNG could be traced. But the craze for such projects could trigger a glut in the market in the horizon of four to seven years. Surprisingly, even a weak pricing environment seemed not to deter business from the creation of liquefaction plants, which are becoming more. Apparently, faith in growing global demand for LNG, its market value and the advantage of flexibility supplies yet prevail.
But the story of the granting of export rights to Shell’s threat is not so much increased competition in a global sense, as the fact that such a decision will be a catalyst for a new wave of discussions on the liberalization of the gas market and slogans of “justice for all”.
For example, the Federal Antimonopoly service (FAS) believes that there is scope for further liberalization of LNG exports. To date, the right to export LNG are “Gazprom” and NOVATEK. The possibility of inclusion on the list and “Rosneft”.
The FAS has designated the position as a whole — over time, there are more grounds for the deprivation of “Gazprom” monopoly for export of network gas. So the holding company should be ready to reflection of attacks on the export pipeline gas monopoly. And formally established a precedent — if Shell is given the right of self-export in the framework of the project “Baltic LNG”, we must understand that by nature it will be a de facto network of gas of “Gazprom”. And advocates of liberalization may well catch on this detail, emphasizing the fact, “why Shell is there and we can’t”.
In General European energy concern is understanding the high prospects of cooperation with “Gazprom” as its own breakthrough alternatives in the energy sphere the EU internal gas production is falling, renewable energy sources do not develop sufficient pace, especially against the background compression programs subsidise them. However, the political partisanship of Brussels does not allow Gazprom to boost the development of infrastructure projects and build a business — you have the speed to overcome difficult bureaucratic and prohibitive norms, the lion’s share of which is stipulated in the notorious “Third energy package”. But exceptions to this set of rules with the inevitability of rising gas shortage in the Old world, presumably, will be more.
Author — the head of analytical Department of national energy security Fund
The opinion of the author may not coincide with the position of the editorial Board