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


American Five-Year Plan of Gazprom


According to Head of "Gazprom Export" Alexander Medvedev, the Russian gas monopoly plans to take up to 10% of the US gas market within the next five years. It means Gazprom considers the US as its biggest partner of the near future.

EIA reports the total US gas consumption in 2008 at 657 bcm, slightly up from the previous year despite the economic crisis. Assuming that the market remains the same for another five years, 10% of it would make about 66 bcm. Note that in 2008, Germany (the biggest current partner of Gazprom) has imported 38 bcm of Russian gas.

The growth of the US gas consumption was accompanied by the decrease of imports of both pipeline gas and, especially, LNG. The share of LNG in the total gas consumption has dropped from 3.3% in 2007 to 1.5% in 2008. This trend is explained by the rapid growth of shale gas production in different parts of the US. The technology of hydraulic fracturing is developing fast, which leads to the decline of production cost and increase of production volumes of unconventional gas. According to many specialists, any growth of the US imports of LNG in the next decade is very unlikely.

According to Mr. Medvedev, to fulfill this ambitious five-year plan, Gazprom wants to use LNG from its Sakhalin-2 project and get more gas by swapping its pipeline deliveries in Europe. However, the main portion of the Sakhalin-2 production will be sold in Asia. To reach the target of 66 bcm, the Russian behemoth would need to swap about 60 bcm a year, or six times the US imports of LNG in 2008!

The US price is also not encouraging. In July 2009, the average price of long-term European contracts of Gazprom was $310-315/mcm, while the US paid for imported LNG just $130-159/mcm (less than the cost of Russian gas delivered to the European Union). A swap scheme will be unprofitable.

At the World Gas Conference in Buenos Aires, the big players in the LNG market like Repsol YPF, Total and Qatargas predicted the low spot prices through the whole five-year period within which Gazprom plans its expansion in the US. According to Reuters, the conference "was dominated by the grim realization that many companies were completely wrong-footed by the unconventional gas revolution and that spot gas prices could remain weak for years". Apparently, Gazprom still does not want to believe the published US statistics on the unconventional gas. As Mr. Medvedev said, "There's a lot of myths about shale [gas] production".

I must note that the five-year plan of taking a 10% share of the American gas market looks unrealistic even at the prices of 2008. Statements of this kind undermine the business reputation of the management of Gazprom.

Mikhail Korchemkin

October 9, 2009


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