Gazprom pipelines and export capacity

Газопроводы Газпрома и экспортные мощности

Gas pipelines of West Siberia

Газопроводы Западной Сибири

Export flows of Gazprom

Экспортные потоки

Spot, Gazprom, Brent

Цены на нефть и газ

End-use price of gas

Russia and USA

Daily gas production

Суточная добыча


Gazprom continues losing its market share in Europe


At a recent meeting in Sochi,  Russia's Prime Minister Vladimir Putin has asked himself a very good question: - What's more profitable for a company - to be more flexible and make concessions to retain its full market share or be tougher, don't give in and take a loss in market share? According to Mr. Putin's answer, the top management of Gazprom is doing right thing by staying tough, and Alexey Miller's (or rather Vladimir Putin's) team should be given the opportunity to go on this way.

It is educative to look at the European results of the current management of Gazprom appointed by Mr. Putin in 2001. Figure 1 shows the shares of Russia, Norway, Algeria and Qatar in the total gas imports of OECD Europe and Figure 2 these suppliers' shares in imports from out of the European Union.

Gazprom was and is steadily losing its market share in OECD Europe. From 2000 to 2008, share of Russian gas in the total imports of OECD Europe has dropped from 39% to 31% (Figure 1). In the same period, Russia's share in the Non-EU imports of OECD Europe has decreased from 48% to 39% (Figure 2). Europe was buying more gas, but most of the incremental supply came not from Russia.

The speed of decline has more than doubled in 2008-2010, when Gazprom's competitors gave in, but the Russian gas monopoly stayed tough.

Figure 1. Major Gas Suppliers' Share in the Total Imports of OECD Europe

Figure 2. Major Gas Suppliers' Share in Non-EU Imports of OECD Europe

Sources: International Energy Agency; Botas.

Flexibility of gas exporters from Qatar, Norway and some other countries has produced impressive results. In June 2005, exports of Norway represented 42% and Qatar just 4% of these of Russia (Table 1). Combined export volume of Norway and Qatar was less than half of Gazprom's. Five years later, in June 2010, Norway and Qatar jointly exported 10% more gas than Russia. There were a lot of lost opportunities for Gazprom in Europe.

Table 1. Russian, Norwegian and Qatari Gas Exports to OECD Europe, bcm

Exporter

Jun-2005

Jun-2006

Jun-2007

Jun-2008

Jun-2009

Jun-2010

Russia

9.5

9.0

10.1

10.7

9.7

8.8

Norway

4.0

4.1

4.7

5.6

6.1

7.7

Qatar

0.4

0.5

0.4

0.6

0.8

2.0

 

 

 

 

 

 

 

Norway/Russia, %

42%

46%

47%

54%

63%

87%

Qatar/Russia, %

4%

5%

4%

6%

8%

23%

Source: International Energy Agency.

In my view, these numbers prove that Vladimir Putin and the people he put in charge of Gazprom are wrong. Apparently, nine years of experience is not enough for them, and Alexey Miller's team will go on staying tough. This is good news for the competitors of Gazprom and bad news for the shareholders of the Russian gas giant.

Mikhail Korchemkin

East European Gas Analysis

September 14, 2010

Malvern, PA, USA

 

 


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