gazprom’s response to u.s. lng exports and the changing global … · 2018-11-05 · tatiana...
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Gazprom’s response to U.S. LNG exports and the changing global market
Tatiana Mitrova
October 19, 2018
2 www.energypolicy.columbia.edu | @ColumbiaUenergy
U.S. and Russia have long been the world largest natural gas producers, but they have not faced off in direct competition
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100
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1985
1987
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2015
2017
US USSR / Russia
0
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100
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1985
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1989
1001
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USSR / Russia US
US and Russian Gas Production
1985–2017 (billion cubic meters) US and Russian Gas Exports
1985–2017 (billion cubic meters)
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The current impact of US LNG on Russian gas exports
• Shtokman termination
• Contract revisions
• More flexible pricing
• Russia speeding up the pipeline projects
• Growing domestic pressure on Gazprom
• Russian LNG development
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European gas market consists of two segments: LTCs and spot, Gazprom has secured strong portfolio of LTCs…
* Europe-41 without Turkey
European gas balance
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700
2005
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BCM
Uncontracted Market Niche
Minimal ContractualQuantaties LNG
Minimal ContractualQuantaties Russian pipelinegasMinimal ContractualQuantaties other pipeline gas
Indigenous Production
Range of Demand
Sources: Nexant WGM 2017, IEA World Energy Balances 2017, IEA Natural Gas Information 2017
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... and is well placed to compete on spot with LNG
Short run marginal costs to Europe
(Russian pipeline gas and US LNG)
Long run marginal supply costs to Europe
(Russian pipeline gas and US LNG)
0,4
0,5
3
0,45
1,2
1,5
0,53
0,4
0
0,5
1
1,5
2
2,5
3
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West Siberia-EuropeUS LNG-Europe
Regas
LNG transportation
Export duty
Transportation tothe Russian border
15% Henry Hub
Henry Hub
Upstream Taxes
Production
0,7
1,2
1,0
3,4
3,5
2,1
1,7
1,4
1,9
2,9
4,7
0,9
1,5
2,1
0,4
0,7
1,7
2,1
0,0 5,0 10,0
Nigeria LNG
Qatar LNG
Russian pipelinegas
Algeria LNG
US LNG
Mozambique LNG
Production and Upstream Taxes
Liquefaction
Transportation
Regas
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Even with the next generation gas fields Gazprom still has low upstream costs
Gazprom’s reported average cost of production
Source: Gazprom
0,2 0,1 0,1 0,2
0,5 0,5 0,5
0,3 0,3
0,5
0,4 0,3 0,4
0,4
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0,6 0,5
0,4 0,4
0,4
0,5 0,5 0,5
0,6
0,9
1,1 1,0
0,7 0,7
0,9
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1,2
2008 2009 2010 2011 2012 2013 2014 2015 2016 2017
Gas MRET, Gazprom, $/mmBtu Production Cost, $/mmBtu
Total Cost of Production in $/mmBtu
$/MBtu
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Gazprom`s target – 33% of the European market
"Our strategic task is to keep
a one-third share of European
consumption and we will
carry out the strategy in a
peaceful way without a price
war”.
Elena Burmistrova, Gazprom Export CEO
FLAME, May 2017
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Low oil price High oil price
High Asian
demand
(no LNG
glut)
Low LNG availability
Gazprom expanding gas exports
NO CHANGE
Increasing competition for LNG
with Asia/
Further contract revisions by
Gazprom
Weak Asian
demand
(LNG glut)
Increasing competition between
pipeline gas and LNG
Gazprom voluntarily decreasing
contractual prices
Tough competition between
pipeline gas and LNG
PRICE WAR (voluntarily
increasing supply in order to
drop prices and crowd away
competitors)
European scenario matrix
Global oil prices and Asian gas demand will define situation on the European gas market
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Gazprom’s strategy in Europe
• Gazprom`s position in Europe is well protected by the existing LTCs,
which guarantee 2/3 of the current export volumes up to 2030
• Gazprom is not looking to take more European market share. It has
learnt the lesson: the company will no longer fight for high gas prices
(as in 2009-2012).
• Compared to most of its new competitors, Gazprom has lower cost
gas. Nevertheless it would prefer to avoid price war with the US and
Qatar LNG in order to maintain export revenues.
• Post 2020 Gazprom`s strategy could be theoretically challenged by
the gas market liberalization and opening of the pipeline export for
Rosneft and Novatek
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Thank
You