Tuesday, November 27, 2012

Russia Mulls Flexible Gas Export Policies

By Sergei Blagov

Russian authorities hinted at a possible end to the natural gas export monopoly, which currently belongs to state-controlled gas giant Gazprom. Meanwhile, the country’s energy executives urged the development of shale gas production in Russia.

On November 20, the Russian energy ministry indicated tentative plans to end Gazprom’s export monopoly and allow other domestic producers to sell natural gas outside Russia. The ministry is considering suggestions of the country’s second largest gas producer, Novatek, to allow independent producers to export LNG, Energy Minister Alexander Novak announced on November 20. He pledged to draft a proposal on this issue by the end of 2012. This year, Russia’s total natural gas production is expected to remain unchanged year-on-year, Novak said. In 2011, the country’s total gas output amounted to 671 billion cubic meters (bcm), according to the ministry. Noval also suggested exempting new projects in Siberia and the Far East from an extraction tax for 25 years. These tax incentives would be aimed at encouraging investments in new energy projects (ITAR-TASS, Prime, November 20).

In the meantime, the ministry has remained slow to disclose a draft of the country’s “energy strategy,” a long-term development blueprint for the domestic energy sector. But while Moscow’s earlier energy plans ignored the issue of shale gas, the latest version of the blueprint is expected to feature that issue prominently.

The country’s energy executives apparently intensified discussions on the development of shale gas production in Russia. Notably, on November 15, the Russian Trade and Commerce Chamber held a discussion on the energy strategy. The meeting focused on the issue of shale gas production in Russia and globally. Guennady Shmal, chairman of the Russian Union of Oil and Gas Producers, told the meeting the country needed long-term plans to develop shale gas production. Russia’s shale gas reserves were estimated at 25 trillion cubic meters, and the country was expected to produce three trillion cubic meters by 2030, he said. Meanwhile, Russia’s total gas reserves were estimated at 287 trillion cubic meters, according to Shmal (http://www.tpprf.ru/ru/news/about/index.php?id_12=40133).

In recent years, Gazprom had ignored the issue of shale gas, apparently placing its hopes on huge reserves of the company’s conventional gas deposits. The gas giant and Russia’s top officials insisted that international gas prices simply would not decrease. When these hopes proved to be detached from reality, the country’s energy officials and executives started to advocate the development of shale gas production in Russia. Russian officials are now following the energy executives’ lead and have also indicated plans to consider more flexibility in gas exports.

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