Russian Gas Industry today and tomorro€¦ · today and tomorrow. ... produced within Russia for independent producers is: - within Custom Union territory ~$0,7 for 1000 m3 for 100

O.Buchnev, T.Shtilkind, NIIgazekonomika Institute

Russian Gas Industrytoday and tomorrow

NIIgazekonomika Institute

1. Russian Gas Industry and JSC «Gazprom»2. Gazprom perspectives:

- new projects- ways and goals of reforms

3. Internal gas market regulation issues4. Gazprom and independent gas producers

Content


1. Russian Gas Industry and JSC «Gazprom»


Russian Gas Industryin 2003-2004 BCM

2003 2004*Gas production 620,2 632,8 JSC "Gazprom" 540,2 545,0

Independents and oil producers 80,0 87,8

Gas comsumption 375,5 379,4Gas exports 183,9 195,2 into Europe 132,9 143,4

into former USSR republics 51,0 51,8

Gas transit 41,6 44,0* preliminary figures


JSC «Gazprom» in 2003-2004

2003 2004*

Gas production, BCM 540,2 545,0Taxes payed, billion rubles 280,2 363,0Investments, billion rubles 173,0 236,8Gas exports into Europe, BCM 132,9 143,4Gas sales within Europe, $ billion 16,5 17,8

* preliminary figures


Russian United Gas Transportation System


Russian UGTS scale

Major pipelines, thousand km 153,8Number of CS 263Installed CS capacity, TWt 43,8Number of UGS 24

UGTS provides:more than 98% of gas transport, 100% of gas exports and transit


2. Gazprom’s perspectives:- new projects, - ways and goals of reforms


Pending Gazprom’s gas projects“Bogorodtchany-Uzhgorod” trunklineconstruction within the frame of International Consortium for Control and Development of Ukrainian Gas Transportation System“Yamal-Europe” trunkline completion Middle Asia-Centre trunkline system reconstructionLNG projects development


Prospective Gazprom’s projectsDevelopment of gas fields in the regions of Yamal peninsula, Ob’ and Taz inlets, Eastern Siberia and Far East, ShtockmanfieldConstruction of North-European pipelineIncrease in annual gas production up to 610-630 BCM in the year 2030Adequate development of the UGTS to support internal and export gas suppliesImplementation of large scale LNG projects


Ways of Gazprom’s reformsSeparation of non-specific assets and Gazprom’s activities as different businesses Unbundling Gazprom’s activities: production, transportation, processing, underground gas storage, services while keeping Gazprom as a integrated company

Goals of reforms:Increase the level of transparencyCost reduction


3. Internal gas market regulation issues


UGTS owner and Third PartiesIn accordance with the Russian Gas Supply Law the owner of United Gas Transportation System is GazpromThird Parties (or Independents) are companies which operate on Russian territory and have no gas transportation facilities


Unequal governmental treatment

The prices on Gazprom’s gas are set by the Federal Tariff ServiceThe prices on gas of independent producers as well as on imported gas are not subject to regulation


Regulated wholesale gas prices11 pricing zonesResidential gas prices lower than industrial onesGas prices for 1000 m3 (excl. VAT):

residential ― $20,7 - $27,4industrial ― $22,1 - $41,4

Gas prices hardly cover production and transportation costGas prices do not correspond with transportation tariffs: sales are more profitable at short distances


Tariff policy

Tariffs are set by Federal Tariff Service which has to take into account economically based cost and profit as well as the financial ability of gas transportation facilities owners to develop gas production, gas networks and underground gas storage facilities


Transportation tariffsDifferent for Gazprom’s group companies and for independent gas producersDifferent for internal transportation and exportsDepend on volumes and transportation distances Do not depend on routs, pipe diameters, load factors etc.


Transportation tariffs valuesTransportation tariff on gas transportation produced within Russia for independent producers is: - within Custom Union territory ~ $0,7

for 1000 m3 for 100 km (excl. VAT)- outside Custom Union territory ~ $0,9Gazprom’s corporate tariffs for its own gas lies in the range from $0,4 to $3,4 for 1000 m3 for 100 km (excl. VAT)


Liberalisation and reliabilityGas markets liberalization both in Russia and in the EU should not contradict withsuch Russian interests and Gazprom’spriorities as:security and reliability of gas deliveries for Russian consumers ensuring of export gas supplies


4. Gazprom and independent gas producers


Common goalsJSC “Gazprom” is responsible for secure and reliable deliveries of gas to Russian consumers and fulfilling Russian export obligationsIndependent producers contribute to Russian gas balance thus assisting Gazprom


Russian gas production

ОАО "Газпром" Независимые

2004 2020

JSC «Gazprom» Independents

13,9%86,1% 76,0% 24,0%


Internal gas market reforms

Widening of free prices sector with the aim of liberalisation of gas pricesRaising the regulated gas prices in order to cover expenditures and attract new investmentsCreating prerequisites for increase ofthe share of Independents in gas productionParticipation of independent producers in gas exports under the Single Export Channel


Prospective pricing policy

Gas prices in the non-regulated sector of gas market should be determined by competition with the prices on alternative types of fuel (coal, oil, etc.) Gas prices in the regulated sector should be high enough to cover costs and attract new investments


Relations with independent producersThe necessary prerequisites for increase the share of Independents in gas production:gas prices in the internal market high enough to cover costs and attract new investmentsthe possibility of participation of independent producers in gas exports within the frame of the Single Export Channel nondiscriminatory access to UGTS with possible participation in financing the development of the gas transportation systems


General scheme of the Russian gas industry development

The most important instrument to reconcile the interests of gas consumers, Gazpromand independent producers and to optimize the rate and scale of gas industry developmentGazprom as the owner of UGTS has to ensure the access to the system for all market players in exchange for adequate legal and financial Independents’ guarantees of their intentions to take part in the General scheme implementation


Thank you very much for your kind attention!

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Russian Gas Industry today and tomorro€¦ · today and tomorrow. ... produced within Russia for independent producers is: - within Custom Union territory ~$0,7 for 1000 m3 for 100