The fortunes of Gazprom, long on the rise due to its grip of the European gas market, now hang in the balance as a gas glut could see its ambitious plans put on the back burner.
The gas giant said this week that exports had ticked up in the first four months of the year, as parts of Europe’s economy show signs of a modest turnaround.
“Naturally, we are expecting positive dynamics compared with 2009,” said Mikhail Malgin, head of Gazprom Export’s department for northwestern markets. “The economy has begun to recover after the crisis but we do not expect a sharp increase in exports.”
Gazprom has played down fears of oversupply harming the market and insisted the recovery will continue, particularly in Central and Eastern Europe.
“They expect this extra supply of gas to be liquidated in the next three to four years,” said Vadim Mitroshin, senior oil and gas analyst at Otkritie.
The biggest challenge on the horizon, however, comes from shale gas production in the United States, which has been described as a “game changer” by BP chief executive Tony Hayward in supplying energy-hungry China and other Asian countries that have resisted the crisis.
Shale gas output could increase from its pre-crisis 2007 level by 71 per cent by 2030, according to the Paris-based International Energy Agency, but some analysts doubt these upbeat figures.
“It is still an open-ended discussion, because even in the US where the industry is a couple of years ahead there are no clear answers to problems such as ecology,” said Artyom Konchin, oil and gas analyst at Unicredit
Gazprom is focusing on developing its liquified natural gas (LNG) projects, with a view to supplying 10 per cent of the US market and developing the Yamal peninsula.
Qatar, however, has already seen its hopes of supplying Europe and the US stumped by the current gas glut, so the battle for new markets could switch to Asia.
The battle for dominance between shale gas and LNG will come down to price, but Mitroshin, of Otkritie, said that shale gas would not develop as quickly as people recently thought.
“The price is too low and it doesn’t deliver proper returns for producers,” he said.
Meanwhile, Gazprom and Ukraine’s Naftogaz are mulling over a joint venture, a step well short of a merger. The two state-controlled companies are discussing which assets each side will contribute and Ukraine is reportedly holding out for a 50-50 split on any deal.