Russia's gas sector: the endless wait for reform? (original) (raw)
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OECD Economics Department Working Papers, 2004
The gas industry is perhaps Russia's least reformed major sector. Prices are regulated, exports are monopolised and the domestic market is dominated by a state-controlled, vertically integrated monopolist, OAO Gazprom. Gazprom combines commercial and regulatory functions, and maintains tight control over the sector's infrastructure and over information flows within it. The sector as it is currently constituted is highly unlikely to be able to sustain sufficient output growth to satisfy both rising export commitments and domestic demand. There is significant potential for accelerating the growth of non-Gazprom production and making gas supply in Russia more competitive, but this will require fundamental reform. The proposals for reform advanced in the paper address two sets of issues. First, there is an urgent need to increase transparency in the sector and transfer many of the regulatory functions now performed by Gazprom to state bodies. Secondly, there is a longer-term need for a considerable degree of unbundling of Gazprom. In particular, it would be desirable to remove control of the sector's transport infrastructure from the company and to revise the arrangements governing gas exports to non-CIS states, which are currently monopolised by Gazprom. At the same time, recent increases in domestic gas tariffs must continue until internal gas prices rise above full, long-term cost-recovery levels.
The transformation of Russia's gas export policy in Europe
Proceedings of the ICE - Energy, 2015
After years of unchallenged commercial domination of a sizeable portion of the EU's gas market, Gazprom is confronted with a statement of objections issued on 22 April by the EU Commission for abusing its dominant market position. The company was already prevented from going ahead with its South Stream project aimed at consolidating Gazprom's grip on Southeast Europe's markets by bypassing Ukraine -due to alleged non-compliance of intergovernmental agreements with the EU regulatory framework. Furthermore, it walked away from negotiations that could have allowed it to access more than 50% of the OPAL pipeline -an onshore branch of the offshore Russian German Nord Stream pipeline -, whilst its attempts to go downstream through the acquisition of European distribution and transmission operators, such as Wingas and DESFA, failed due to current political tensions and the risk of a negative Commission ruling on the operation.
SSRN Electronic Journal, 2000
Gazprom, Russian's prime state owned gas producer, is facing severe pressure stemming from international gas market dynamics, EU regulation and the Ukraine crisis. Slowing gas demand coupled with shifting pricing models and a persisting transit issue pose significant challenges for Gazprom's business going forward. Domestic pressure emerges from competition arising from private companies, mainly Notatek, but also state owned rival Rosneft, and is reinforced by governmental moves toward more market oriented Russian gas sector organization. Gazprom's options include pivoting to alternative markets, notably China; reverting to international legal bodies and market principles to counter EU regulatory pressures; and to depoliticize gas trade in order to generate long term expectations on its prime market -Europe. We pose that neither of these options is likely to fully solve Gazprom's dilemma, whose competitive position will arguably further weaken both domestically and internationally. We believe that Gazprom's best option would be to aim for depoliticizing gas trade, by way of giving up its de facto monopoly on gas exports to Europe.
Unnatural monopoly: the endless wait for gas sector reform in Russia
Europe-Asia Studies, 2005
THE NATURAL GAS INDUSTRY is probably the least marketised major sector in Russia. The transitional institutions and structures created in 1992 have proved highly resistant to change, and attempts to increase the role of market forces in the sector have had little success. It is increasingly clear, however, that lack of reform represents a threat to the sector's long-term development and, by extension, to Russia's longterm growth. 1 This article examines the state of the gas industry today, as well as options for reform. The first section describes the structure of the sector and its role in the Russian economy. This is followed by an analysis of the domestic market. These two sections highlight the anomalous position of the vertically integrated gas monopoly OAO Gazprom. Though constituted as a joint-stock company, Gazprom operates in many ways as an arm of the state, combining commercial and regulatory functions, and maintaining tight control over the sector's infrastructure and over information flows within it. Gazprom's control over information is particularly important, as it renders opaque much of what happens in the sector. The third section considers the major sources of pressure for change, chief among which is the need to stimulate investment in gas production in order to sustain output over the long term.
The Political and Commercial Dynamics of Russia's Gas Export Strategy
Gas exports have historically provided a foundation of economic and political strength for Russia and a source of significant revenues for its leading gas company, Gazprom. However, lower commodity prices, the imposition of sanctions on Russia in light of the Ukraine crisis, lower gas demand in Europe, the EU’s desire to diversify away from Russian gas and increasing competition from new global LNG supply are presenting multiple challenges. A search for new markets in Asia, and especially China, has begun, but is currently not progressing as fast as Russia would have hoped, while domestically Gazprom’s position is being challenged by third parties who are keen to break the company’s export monopoly. This paper, jointly authored by James Henderson and Tatiana Mitrova, examines the emerging trends in Russia’s export strategy, identifying the key political drivers as well as the commercial factors that are influencing policy making. It analyses the catalysts behind Russia’s “pivot to Asia” in the gas sector, assesses the likelihood of this strategy being a success and argues that Europe will remain of vital importance as a major market for Russian gas for the foreseeable future. In light of this, the paper also examines Gazprom’s evolving gas marketing strategy and asks whether the company is adapting to the changes in European regulation and legislation in a positive manner. It considers the competitive position of Russian gas in Europe and Asia, delivered both by pipeline and by potential new LNG projects, and argues that Russian gas can have a pivotal role in both markets as its cost of supply is relatively low. Indeed, although it would currently appear that Gazprom’s strategy is being somewhat improvised in reaction to political and commercial events, the authors’ conclude that the company is gradually edging towards a more market-based outlook that could ultimately allow it to prosper even in a more competitive global gas market. It will need to continue this trend if it is to fend off competition from expanding global LNG supply but also from domestic competitors such as Novatek and Rosneft, who are keen to provide their own solutions to the challenges facing Russia’s gas export business.
Post-Communist Economies, 2016
Gazprom enjoys a dominant and privileged position in the Russian energy sector, and indeed in the economy as a whole. This article analyses the company's failure to achieve the Russian state's objectives for the country to become a force in the global LNG (liquefied natural gas) market. Has it weakened the company's standing relative to other industry players and the authorities, with the possibility that they could unleash broader reforms in the Russian gas sector? Short-term political and economic considerations may slow progress towards a radical outcome, with Gazprom's importance as a domestic and foreign policy tool providing some protection at a time of uncertainty for the Kremlin, but in the longer term it may well be the case that the liberalisation of LNG exports in December 2013 comes to be seen as the first step in a much broader reorganisation of the Russian gas sector.
A new era in Russian gas market: The diminishing role of Gazprom
Energy Strategy Reviews, 2015
Other than Rosneft, there are also several Russian oil companies with significant production such as the private company, Lukoil and the state owned Gazpromneft and Surgutneftegaz. 2 The term "non-Gazprom producers" is used rather than "independent producers" in order to describe the increasing role of gas companies in Russia.
Monitor Strategic / Strategic Monitor, no. 3-4: 71-80, 2010
This paper analyses Russian Federation’s energy policy as defined by relevant governmental documents drafted by Kremlin and as resulting from Moscow’s behavioural dynamics (especially those actions with a certain energy dimension). In this context, the paper identifies that although Kremlin’s energy strategy orbits around the core concepts of Gazpromization and Restauration it is still far from being the exclusive result of a monolithic arch-strategy of Kremlin, but rather a flexible implementation of Moscow’s interests (deeply linked with global energy market’s price volatility). Finally, the manuscript claims that that conventional vision of Russia being an energy superpower is over-dimensioned, because although Kremlin’s actions reflect a certain hegemonic approach, they are fuelled by important survivalist elements (the demographic vulnerability of Russian Federation Eastern provinces, the gas deficit which can severely hit the domestic economy, etc)