Important Changes in Russian Gas Business Environment

Price of Central Asian Gas

• In 2005, Turkmenistan wants to raise the price of its gas from $44 to $60/mcm (at the Turkmenistan border).

  • This would result in the price of about $77/mcm at the Russian border.

• The 2004 price of about $60/mcm at the Russia-Kazakhstan border is roughly equal to the cost of new Bovanenkovo (Yamal) gas delivered to the same area.

  • Gas from currently producing fields of West Siberia can be delivered to Russia-Kazakhstan border at a much lower cost.

• Gazprom is unlikely to find an immediate substitution for the Turkmenistan gas.

  • The super-giant Zapolyarnoe field has already reached its plateau production level of 285 mmcm/day (or 100 bcmy).

  • Production of other major fields is declining.

  • The next super-giant field - Bovanenkovo - will not start production before 2009.

  • Gas consumption in Russia, FSU and Europe is growing.

  • The timing of Turkmenistan's move indicates it may have been caused by the above mentioned factors.

• The Turkmenistan price hike opens opportunities for Russian independent gas producers.

  • It would require cooperation from Gazprom, which is the major problem for independents now.

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Last modified: 02/23/05                                         ©East European Gas Analysis