Monday, October 26, 2009

Eurasia Energy Brief

by Roman Kupchinsky


Is Russian Prime Minister Vladimir Putin willing to give up Gazprom’s monopoly on gas exports in return for granting Gazprom higher domestic gas prices? The gas monopoly has been lobbying to increase the domestic gas price for years – presently set at $58 for 1,000 cubic meters (tcm) – to a more realistic (and profitable) one of close to $125/tcm. The government, however, has resisted such a dramatic increase fearing the backlash it might create among voters in future elections.

The pressure on the government is coming from Russian oil companies who feel cheated by the fact that Gazprom often refuses to buy their associated petroleum gas at a fair price in order to sell it to European customers at 4-5 times the purchase price.

According to the Russian daily Vedomosti, “It is not a secret that there are times when Gazprom refuses to allow gas (from independent producers) into its pipelines, even when consumers are waiting for gas, a source in Rosneft stated. And while the official producers of gas refuse to discuss this, Lukoil has a strategic relationship with Gazprom with which it is highly satisfied."


British gas auditors Gaffney, Cline &Associates confirmed their earlier audit on the size of Turkmenistan’s gas reserves. According to the British firm, the country has proven reserves of 14 trillion cubic meters of gas.

The Russian daily Vedomosti reported that Turkmenistan will forbid Gazprom from re-exporting Turkmen gas to European customers. This condition might be incorporated into the new gas sales contract being negotiated between Gazprom and Turkmengas. The daily comments that this could well be a tactic by the Turkmen side to obtain a “European price” for its gas.

The newspaper Vremya Novostei speculates that such a condition will deprive Gazprom of any logical reason for purchasing gas from Turkmenistan.

Milov on South Stream

Vladimir Milov, the former deputy head of the Ministry of Energy of Russia, told the Ukrainian UNIAN press agency that it was unlikely that South Stream would ever be built due to its excessive cost and lack of need.

“Forget about South Stream and Nord Stream, South Stream is only a scarecrow to scare the Europeans and the Ukrainians. It simply will never come to be since there is no need for it… There is no logical reason to pay $60 billion dollars to build it in order to bypass Ukraine.”

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