Russia undermines the export monopoly of Gazprom

The Commission of the Russian Security Council suggests discussing the liberalization of gas exports.
The Interdepartmental Commission attached to the Russian Security Council on Security in the Economic and Social Sphere recommended that the government determine the conditions for liberalizing the export of Russian gas. "Vedomosti" got acquainted with the minutes of the meeting of July 6. The document was approved by Security Council Secretary Nikolai Patrushev. The authenticity of the document was confirmed by a person close to one of the commission members.

The commission includes representatives of ministries and departments as economic (Ministry of Economic Development, FAS, Minpromtorg, etc.), and power (Rosgvardia, FSB, SVR, MVD) blocs. In addition to officials at the meeting on July 6, top managers of two largest independent gas producers were present: Rosneft Vice President Vlad Rusakova and Novatek Board Deputy Chairman Denis Khramov. The representative of Gazprom was not present at the meeting.

 The participants discussed the development of projects for the production of liquefied natural gas (LNG) in the world as a threat to Russia's energy security. "The structure of the demand for energy is changing," the minutes of the meeting said. The development of LNG projects strengthens competition in the European and Asian markets, and this worsens the conditions for Russian gas supplies there. The Commission recommended that the government "determine the priority directions of the state policy for the development of the LNG industry", so that in the medium term Russia will become "one of the world leaders in the production and export of LNG"; "Coordinated strategy" of gas supplies "to target markets" and "conditions for liberalizing natural gas exports, taking into account the existing risks to ensure economic security" of Russia.

The Security Council representative confirmed that the commission was really meeting on July 6. But from the substantive comments - which "target markets" are meant, what was meant by the liberalization of gas exports and why the representative of Gazprom was absent at the meeting - he refused.

The monopoly on the export of gas through the pipeline belongs to Gazprom. But bypassing it you can export LNG. Such a right exists only with state-owned companies, if they liquefy gas from offshore fields, or from private structures, if they until 2013 obtained a license to develop gas fields with the possibility of building an LNG plant there. So far, in Russia there is only one such plant - launched in 2009 by Sakhalin Energy (operator of the Sakhalin-2 project being developed on the terms of the production sharing agreement, control by Gazprom) with a capacity of 9.6 million tons. Nevertheless, In 2015. Russia was the eighth largest exporter of LNG in the world. By the end of this year, Novatek together with its partners will launch the first phase of the Yamal LNG project. After reaching full capacity in 2019, the complex will produce 16.5 million tons of LNG per year. In addition, both companies have projects for new plants. Gazprom has a total capacity of 20 million tons in Ust-Luga and Vladivostok. Novatek has 18 million tons of Arctic LNG-2. Rosneft also owns a controlling stake in the Pechora LNG project. Its parameters have not been determined yet.

What threatens Gazprom

The Commission of the Security Council could have in mind both options for liberalizing gas exports, both LNG and pipeline gas, assumes the manager of GL Asset Management, Sergei Vakhrameev. It is necessary to remove all barriers to the export of LNG, the expert continues.

 The chances of liberalizing the export of pipeline gas are now less, Vakhrameev notes. The government fears that the emergence of new players in export markets will increase competition and lead to a fall in prices for Russian export gas, and because of this and budget revenues. But for Gazprom itself, this would be better - the company, having felt competition, would begin to work more efficiently, Vakhrameev concludes.

Gazprom is the largest gas producer in Russia. It accounts for almost two thirds of the production. At the same time, he directs more than 40% of the raw materials for export to the far abroad. If independent gas producers gain access to the export pipeline in proportion to their share in production, Gazprom's revenue may decrease by $ 6.5 billion (with total revenues of $ 100.7 billion in 2016), the Prosperity Capital Management Olga Danilenko.

"The commission is an important closed body, and, of course, the development of its decisions is mandatory for ministries," states a high-ranking federal official. One can even say that the decisions of this body have a "special status," he emphasizes. But it is not necessary that a decision on export liberalization can be made. Back in the early 2000's. Prime Minister Mikhail Kasyanov and Economics Minister German Gref promised to restructure Gazprom (divided into transport and mining companies), but the matter was eventually postponed by President Vladimir Putin's decision.

Export with coordination

 Independent gas producers have long asked for liberalization of gas exports. In June, Rusakova from Rosneft told Interfax that her company would like to conduct an experiment. Its essence is to give Rosneft the opportunity to supply gas to these new markets, naturally in close coordination with Gazprom in order to exclude the competition of Russian gas suppliers. " The state company has already concluded several gas supply contracts. For example, it signed an agreement on strategic cooperation in the gas sector and a memorandum of understanding on the sale of natural gas with its largest minority shareholder, BP. The parties plan to develop joint projects for gas production and LNG projects in Russia and abroad with the possibility of marketing and marketing gas in international markets. Later, a source close to Rosneft explained that it could be about swap gas supplies.

The effect for Gazprom from liberalizing gas exports is difficult to estimate, says BCS analyst Kirill Tachennikov: it is not clear how big the threat of price reduction on the part of independent producers. In the short term, this may be a drawback for the Russian budget, he believes. But the collapse of prices can be avoided if independent producers supply gas to those customers who previously had no contracts with Gazprom, Vedomosti's interlocutor in one of the gas companies is sure. He says that some European companies want to buy gas in Russia, but are not ready to cooperate with the gas monopoly.

 Europe really wants to liberalize the export of Russian gas: at the beginning of summer the European Commission requested a mandate for negotiations with Gazprom, in which it outlined the requirements to partially extend the provisions of the Third Energy Package to the underwater part of the North Stream-2. This implies access to it by third parties. These may be other Russian companies, for example, Rosneft or Novatek, a person familiar with the EU proposal said. An alternative idea was to sell gas on the territory of Russia, and "anyone can transport it on the bottom of the Baltic Sea," said another person who saw the document.

Representatives of the Economic Development Ministry, the Ministry of Energy, Gazprom, Novatek and Rosneft declined to comment, and their government counterpart did not answer Vedomosti's questions.