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Gazprom: breakout strategy

Gazprom: breakout strategy

Gazprom is under double pressure. It is becoming more and more difficult for the company to maintain a dialogue with the EU that perceives the gas giant as instrument of political pressure by Russia.

Ukraine is again on the agenda both as a capricious consumer and a shrewish transit state. Large independent gas producers continue attacking Gazprom on the domestic market; they are suffering from sanctions and count on expansion of their share on the Russian gas market as compensation.

Gazprom is looking for a way-out, including sharp intensification of its Eastern policy. The Russia-West confrontation made diversification of Russian exports to the Asia Pacific region not just urgent and desirable. This is the only possible strategy from the point of view of survival.

The question is about the scale and the pace of this process. The possibility that large-scale gas supplies to China will be carried out at the expense of exports to other directions is as high as never before.

However, Moscow still counts on restoration of partnership ties with Europe and preservation of the huge potential of mutually beneficial cooperation that has been accumulated over the past 40 years of Russian natural gas exports to Europe.

There are significant changes on the domestic natural gas market. The share of independent gas producers in the area of the Single System of Gas Supplies has already surpassed a 40% threshold, which leads to unprecedented decline in gas production by Gazprom amid stagnation on the market. Numerous systemic imbalances create risks for normal functioning of the Russian gas sector, which requires an extremely accurate approach of the state as regulator.

The sanctions have not directly affected Gazprom but its financial standing is influenced by a number of negative factors, e.g. non-payments by consumers and decreased export prices, as well as the necessity to increase investments in new large-scale projects.

Key topics of the report:

  • Gazprom and Ukraine: what comes next?

    • The “winter package”, preservation of transit risks
    • The essence of reverse supplies
    • Prospects of Ukraine as consumer of Russian natural gas
  • Gazprom in Europe

    • Transformation of the European gas market, Gazprom’s standing
    • Gazprom’s search for a new strategy in Europe
    • Changes in Gazprom’s exports
  • The course to the East

    • The first gas contract with China
    • Prospects of the “western route” of gas exports to China
    • LNG in Russia’s Far East, export ambitions of Rosneft
  • The domestic gas market at the crossroads

    • An optimal market model amid excessive capacities
    • The consumption dynamics
    • Price regulations, the launch of exchange trade
    • Debates about reforms in the Russian gas sector
  • Gazprom’s finances amid sanctions

    • Gazprom’s financial standing
    • Investment program The state fiscal policy
    • The state fiscal policy
  • The forecast of developments

Contents of the report:

Introduction 3
Chapter 1. Domestic gas market at crossroads 4
1.1. Gas balance in the Single System of Gas Supplies zone 4
1.2. Gas production: excessive capacities 7
1.3. Natural gas consumption: negative dynamics 13
1.4. Price regulation and other imbalances. Launch of exchange trading 16
Chapter 2. Gazprom and Ukraine: expectations 21
2.1. Ukraine’s natural gas balance on the eve of winter 21
2.2. Gas imports by Ukraine, reverse supplies 23
2.3. Reserves at underground gas storages, Ukraine’s unpreparedness for the winter season. “Winter package 27
2.4. Transit through Ukraine. South Stream, plans of Ukrainian GTS privatization 30
Chapter 3. Gazprom on foreign markets 34
3.1. Purchases and sales in former Soviet republics 34
3.2. Exports to the EU and Turkey 37
3.3. Suspension of South Stream 42
3.4. Gazprom in search for new strategy in Europe 47
Chapter 4. Course to the East: from possibility to necessity 51
4.1. First contract with China 51
4.2. Altai project 56
4.3. LNG in Russia's Far East, export ambitions of Rosneft 59
Chapter 5. Medium-term forecast of developments 61
5.1. Domestic market 61
5.2. Export strategy 62
5.3. Financial standing of Gazprom 63
5.4. HR policy 65
Date of release: December 31, 2014

If you are interested to obtain please contact » Elena Kim

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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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