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Gazprom during Putin`s latest tenure

Gazprom during Putin`s latest tenure

The past few years have been rather difficult for Gazprom. Competition on foreign markets is growing as well as the pressure by domestic competitors. Moreover, poor results produced by Gazprom in 2012, e.g. decline in production, reduction in its share on the domestic market, decrease in exports and export revenues, enabled its opponents to launch a powerful campaign against the gas giant’s monopoly and against its management.

Besides NOVATEK’s desire to get access to export revenues, there are ambitions of Rosneft that has declared about large-scale plans in the gas sphere and gained control over some gas assets.

Only the sharp improvement of conjuncture in Europe made it possible to repulse this attack with minimal losses, i.e. liberalization of LNG exports. Nevertheless, we can ascertain that the situation in the gas industry has changed profoundly. Three strong bears are now trying to get along together in one ‘gas lair’.

Meanwhile, the situation around Ukraine makes no headway, the European Commission presses Gazprom despite obvious problems with the EU gas balance, and negotiations with China are not easy. It is coupled with new fiscal and tariff policies of the state towards gas producers.

Key topics of the report:

  • Transformation of the gas industry

    • Growth of NOVATEK, ambitions of Rosneft
    • Production strategies of three companies, battle for domestic market
  • Restructuring of Gazprom

    • Mass media reports and reality
    • Lobbied decisions, position of president Putin as supreme arbiter
  • Liberalization of exports

    • Struggle for LNG exports
    • Prospects of discussing free piped gas exports
  • Gazprom’s export policy

    • Relations with the EU
    • Comeback of Russian gas to Europe
    • Eastern vector, negotiations with China and eastern consumers
    • LNG projects of Gazprom
  • Transit problems

    • Gas relations of Russia and Ukraine
    • Situation on Ukrainian gas market
  • Financial and economic situation

    • New tariff and fiscal policies
  • Investment program: epoch of restrictions

  • Forecast of medium-term developments

Contents of the report:

Introduction 4
Chapter 1. Transformation of gas industry: three bears in one lair 5
1.1. General situation in Russia’s gas sector 5
1.2. Production strategies of Gazprom, NOVATEK and Rosneft 9
1.3. Struggle for domestic market 15
1.4. Attempt to raise topic of Gazprom reforms 20
Chapter2. Gazprom on foreign markets: exports returning 21
2.1. Exports to former Soviet republic 21
2.2. Gas exports to Europe and Turkey 25
2.3. Confrontation against European Commission,the future of gas transportation projects 30
Chapter 3. Gazprom and Ukraine: Rubicon crossed? 32
3.1. Political and economic situation around association agreement with the EU 35
3.2. Ukraine’s gas balance. Exclusion of Naftogaz 36
3.3. Virtual reverse supplies 42
3.4. Ukraine’s role of transit state 44
Chapter 4. Eastern vector. Awaiting China 47
4.1. Launch of Kirinskoe deposit, development of gas resource base in the east 47
4.2. Transportation and processing 49
4.3. Forecasted gas balance, talks with China and other options of exports, competition against Rosneft 51
Chapter 5. Financial redistribution, investment limit 55
5.1. Frozen prices in Russia 56
5.2. Taxation press, tax preferences 60
5.3. Investment program: South Stream new driver, Eastern Siberia shadow driver 63
Chapter 6. Medium-term forecast of developments 66
6.1. Administrative attack on Gazprom: second wave 66
6.2. Production, domestic market 68
6.3. Exports and European market 69
6.4. Ukraine, transit risks 70
Date of release: January 21, 2014

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Analytical series “The Fuel and Energy Complex of Russia”:

New OPEC+ Deal and Future of Oil Business in Russia
Gazprom on the background of external and internal challenges
Regulation of Oil and Gas Sector in 2019 and Prospects for 2020
Fiscal Policy on Oil and Gas Sector: Revised as Often as Wikipedia
The tax system in the oil and gas sector continues to undergo radical changes. The beginning of 2019 saw the introduction of a new tax regime: additional income tax. That experiment was supposed to start migration of the oil industry to an innovative principle of taxation: on profit, not revenue. It seemed that a new main road was found. In the same year, however, the Finance Ministry launched an overt offensive against AIT. The fear of loss of government revenue now is more powerful than the threat of causing oil production to collapse in the medium term because of a tax system that does not stimulate investment. The Finance Ministry would strongly prefer to speed up the tax manoeuvre completion that earns the state budget additional money. Oil and gas companies respond to this with individual lobbying, attempting to wangle special treatment for their projects.
Ukrainian Gas Hub: Climax at Hand
The “zero hour” comes in less than a month: the contracts for gas transit through Ukraine and for supplying Russian gas to the country terminate at 10 am on 1 January. Meanwhile, Gazprom and Naftogaz are very far from looking for a mutually acceptable solution. The entire European gas business is watching intently the negotiations between Russia and Ukraine. Everyone is waiting for a new “gas war”: the January 2009 events proved to be a serious test both to European consumers and to Gazprom as a supplier. Is there still a chance of agreement? If there is not, will Gazprom cope with its obligations to deliver gas to Europe? Is Russia bluffing as it assures that the new infrastructure and gas in underground storage facilities will enable it to get by without Ukrainian transit even as soon as this winter? What will happen to Ukraine itself at the beginning of 2020?

All reports for: 2015 , 14 , 13 , 12 , 11 , 10 , 09 , 08 , 07

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