Bloomberg News

Putin May Weaken Gazprom’s Natural-Gas Export Grip in Future

October 06, 2011

(Updates with a Putin quote in second paragraph.)

Oct. 6 (Bloomberg) -- Russia “doesn’t exclude” allowing natural-gas producers other than OAO Gazprom, the state export monopoly, to ship the fuel abroad eventually after European Union investigations into possible antitrust violations.

“European colleagues are pushing us to do so with unending searches at Gazprom’s companies,” Russian Prime Minister Vladimir Putin said, referring to raids by EU regulators last month on gas companies across the continent.

Russia has no plans to end Gazprom’s legally enshrined hold on exports at present, Putin said at an investment conference today in Moscow. While such a move now might boost exports, it would also damp prices, he said.

Gazprom gained a legal monopoly on exports in 2006 as the government sought to prevent domestic competition from undermining prices and oil producers raised output of the cleaner-burning fuel. Gazprom, the world’s biggest gas producer, has been trying to diversify away from Europe, where it supplies 25 percent of the market’s gas, with routes to Asia and the Pacific.

“The biggest beneficiary of this would likely be Novatek, which seems already to be working on establishing a client base abroad,” Pavel Sorokin, an oil and gas analyst at Alfa Bank, said by phone from Moscow. “If Russia moves in the direction of liberalization, this might help Novatek gain market shares.”

Yamal LNG Exports

OAO Novatek, Russia’s second-largest gas producer, supplies natural gas only in the domestic market. It has gained support from the government and Gazprom for potential exports of liquefied natural gas from the Yamal LNG project with Total SA, which is slated to start in 2016. Novatek will pay Gazprom to ship the fuel abroad.

Exxon Mobil Corp., which has the right to export gas under a production sharing agreement with the government, hasn’t yet developed supplies to China as initially planned, while Gazprom pushes the Irving, Texas-based explorer to sell gas from the Sakhalin-1 project for domestic use.

OAO Rosneft could add as much as 10 billion barrels of oil equivalent in reserves if it had better access to gas pipelines and customers, Peter O’Brien, a former vice president at the state-controlled oil producer, said on Feb 2.

--With assistance from Anna Shiryaevskaya in Moscow. Editors: Torrey Clark, Stephen Cunningham

To contact the reporters on this story: Scott Rose in Moscow at rrose10@bloomberg.net; Stephen Bierman in Moscow at sbierman1@bloomberg.net

To contact the editors responsible for this story: Balazs Penz at bpenz@bloomberg.net; Will Kennedy at wkennedy3@bloomberg.net


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