Platts: Russia to consider gas exports by independent East Siberian producers

July 22, 2014

Russia's President Vladimir Putin has asked his government to consider allowing independent producers to export gas from new fields in East Siberia and the Far East by September 1 in a move that would effectively spell an end to Gazprom's export monopoly. The decision follows a meeting by the presidential energy commission on June 4, Russia's Vedomosti daily reported Tuesday.

In Russia, gas producers that are not controlled by Gazprom, which enjoys the exclusive right to export pipeline gas and controls the trunk gas transportation system, are considered independents, irrespective of their ownership.

Putin also asked the government to consider allowing independent producers to participate in the construction of the gas transportation system in Russia's eastern regions on an economically viable basis, the newspaper reported.

Earlier this year, Russia allowed the country's second-largest gas producer Novatek and biggest oil company Rosneft to export LNG from projects that are under construction and expected to come online after 2016.

At the June meeting, Rosneft's CEO Igor Sechin called on the government to allow independents to export natural gas from planned projects in eastern Russia as well, where annual output has been put at 200 billion cubic meters, according to Rosneft's estimates. Until recently, the government was reluctant to grant gas export rights to producers other than Gazprom in a move to avoid competition for Russian gas in international markets.

But recently, discussions on allowing independent producers access to international markets have gained momentum as competition in the Russian gas market is growing and companies are planning a drastic boost in production.

During the June meeting, Sechin urged the government to allow independents to export gas to China via the planned Power of Siberia pipeline.

The government is unlikely to grant unlimited export rights to all independents. It was more likely to choose another option, for example one where independents would sell their gas to Gazprom at prices calculated as a netback to its export prices, several market experts said.

Liberalization of gas exports "is possible to resolve by sales of a certain proportion of a producer's output to Gazprom at the gas giant's export netback," Sergei Kudryashov, head of state-run Zarubezhneft and also deputy energy minister, said at the presidential commission meeting in June.

Source: Platts, 2014.