Gazprom Dreams
Top managers of Gazprom live in an imaginary world—and Russian political leaders who repeat their statements risk looking like gullible victims of a con trick.
When CEO of Gazprom Export Alexander Medvedev was declaring on June 20 that the company would export a record volume of gas during 2012, ‘at least 222 billion cubic meters’, he added: ‘It’s very funny to read that Gazprom is facing problems associated with decreasing export volumes. This is absolutely not so.’ As usual, he voiced soothing lies the Russian president wanted to hear. Medvedev could not be unaware of the real state of affairs on the traditional markets of his company.
Actually, export of gas from Russia fell 3.6 percent during the year to 185.8 bcm, and deliveries of piped gas to the ‘far abroad’, that is, beyond the borders of the ex-USSR, totaled 112.7 bcm, 3.5 percent less than in 2011. Norway, in comparison, increased its sales in Europe by 14.2 percent to a total of 107.6 bcm, not counting 7.96 million tonnes of LNG.
It is worth noticing again that the volume of gas that went across the former Soviet borders to foreign destinations was less than half of the summary capacity of the pipelines that go there, some 250 bcm a year. Still, defying elementary logic, market trends and economic considerations, the Russian gas monopoly is frantically promoting new pipelines to the same stagnant European market, such as South Stream (anther 63 bcm a year) and additional threads of Nord Stream. ‘Pipeline construction is a crazy addiction of Russia,’ a top executive of a European power company told RusEnergy.
Gazprom is retreating in the domestic upstream sector as well. The largest competitor, Novatek, added 5.9 percent to its gas production last year and oil companies posted an increase of 5.7 percent. (It could compensate just a portion of decline in Russia’s production of natural gas: the sector lost 2.3 percent of its annual volume in 2012, and domestic consumption shrank 2 percent.)
Russian gas export—how low will it go? The Ministry of Economic Development is revisiting its forecasts. It admitted in September that foreign sales of natural gas were expected to total between 186.6 bcm and 206.5 bcm in 2014 instead of the earlier estimate in the range of 223-240 bcm. The prognosis for 2015 is also more pessimistic than before: 209 bcm instead of 253 bcm.
The monopoly spends keeps allocating immense budgets to propaganda campaigns. In Russia, it depicts itself as ‘The National Treasure’; and abroad, hires PR operators to convince the Americans that shale gas is a dangerous delusion. Polls of professional analysts, however, reveal a derogatory attitude toward Gazprom, which is recognized as the worst performer of the year in the Russian energy industry. Its very existence in the current shape is an increasingly heavy burden on the national economy.
Published with the kind permission of RusEnergy. Mikhail Krutikhin is with RusEnergy, an independent privately-run company established in 2000 by a group of Russian experts with a long experience in consulting and publishing business. Based in Moscow, it specializes in monitoring, analysis and consulting on oil and gas industry of Russia, Central Asia, Azerbaijan and Ukraine.