Gazprom’s Not the Only Player in Russian Fields

December 5, 2012

the industry, and this indicator is improving every year as  the result of introduction of new facilities for gas utilization. In the medium-term period, the company plans to bring gas production to 22 bcm a year. In methane content (94-96 percent), gas produced at its fields is similar to natural gas which contains 98 percent of methane, which enables its utilization not only for the company’s technical need at the oil fields, but also its supply to the main gas pipelines.
These are major IGP in Russia, which are involved in gas production and sale. Performance of other companies is significantly lower.

Gas at the Exchange

Some words about gas trade. Since November of 2006, gas bidding with participation of independent producers has started at the electronic trading site – ETS of Mezhregiongaz (Gazprom subsidiary). Initially bidding took place once a month, and from February 1 of 2007, – every ten days. Original experiment “5+5” (at 5 bcm of gas from Gazprom and IGP) exhausted these amounts and passed over to the formula “7.5+7.5”. As one can see, the parity is formally maintained. However, Gazprom was allowed to sell amount of gas 15 percent larger compared to that of independent companies, as the latter have a right to sell gas at free prices and outside ETS.
A recent example – 18th of June, when gas bidding with delivery in the period from the 1 till the 31 of July of 2008 was held at the ETS of Mezhregiongaz. Alongside with Gazprom, NOVATEK, LUKOIL, Rosneft and Itera were quite active at this trading. 144.7 mcm of gas were sold on that day, including 62.1 mcm by the gas giant, and 82.6 mcm – by independent producers.
Electrical power companies were traditionally main purchasers. According to the bidding results, average gas price at the balance points amounted to 1,466.19 rubles, and at the consumers’ gas distribution stations – 2,246.55 rubles for thousand cubic meters, which was 34 percent higher than the weighted average gas price established by the RF Federal Tariff Service.
The Government regards the electronic gas trade as one of the tools for passing over to the market principles of the price formation. And the bidding results show that some industrial gas consumers are ready to pay the European price already now.
Besides, Gazprom commenced setting up an exchange in St. Petersburg, where futures trading will be arranged. Its opening is planned next year. After commissioning of the Nord Stream gas pipeline, international gas trade will be started for rubles.

Positioning Tone
According to the official statements, Gazprom maintains the tendency of IGP share increase at the gas market. It is expected that by 2020, independent producers will bring the annual gas production in Russia to the level of 140-180 bcm, and the gas monopolist – to 670 bcm. However, Gazprom representatives are not quite sincere when they say that expansion of gas production by the independent producers could promote strengthening of the potential of the Russian fuel-energy complex. This