Russian Gas Exports: New Challenges and Opportunities

DAY TWO, 09:00-10:10

The global economic recession, the drop in energy carrier prices and shrinking demand have all severely hit gas production and exports from Gazprom, one of the foundations of Russia’s economy. The most acute issue is the restoration of the gas giant’s exports, which secure the bulk of the company’s revenues and profits. Meanwhile, reduced demand for Russian gas from Ukraine unexpectedly exposed Russia’s vulnerability from purchases of Central Asian gas, which, once so desired by Gazprom to secure a “gas respite” prior to commissioning the Yamal and Stockman megaprojects, became overly expensive and redundant in a period of market glut.

A more real threat to Gazprom’s pipeline exports could come from Europe’s plans to boost LNG imports. In a few years, the combined capacity of LNG terminals in Europe could surge 42% to 170 bln m3 per year, which is more than Gazprom’s relevant pipeline gas exports. Another limitation to the company’s gas export growth comes from the European Commission’s plans to cut growth rates for natural gas, enhance energy savings and build up gas supply diversification.

Will this clash with Gazprom’s export ambitions, as its two pipeline megaprojects alone (Nord Stream and South Stream) provide for additional export capacity to Europe of 122 bln m3 annually?Finally, the economic crisis has stimulated serious changes on the US gas market, which Gazprom considers one of the new long-term outlets for its gas. Sharply increased gas production from gas shale, relatively low gas prices and greater emphasis on alternative sources of energy supplies make the once very appealing US LNG market less promising under the current circumstances. As a result, Gazprom was forced to reduce its long-term goal of a 15-20% share of the US gas market to a more realistic, but still challenging, 5-10%.Our panelists will explore the real scope and depth of these problems and possible ways of overcoming them, as well as Gazprom’s current opportunities to consolidate its position on traditional export markets and to enter new ones.