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- Gas supplies to Europe in 2012: 138.8 billion m3
- Gas supplies to the CIS and Baltic States in 2012: 64.4 billion m3
Gazprom in Foreign Markets
- How much gas does Gazprom sell abroad?
- What countries does Gazprom supply gas to?
- What are Gazprom’s international partners?
- Under what terms and conditions does Gazprom export gas?
- Do Gazprom’s export prices differ from those for the domestic gas consumers?
- How are Russian gas prices set for the CIS countries?
- What is the basis for a high end-consumer gas price in Europe? Does Gazprom have opportunities to sell gas to end consumers abroad?
- What impact does the European gas market liberalization have on Gazprom’s export policy?
- What place does liquefied natural gas hold in Gazprom’s export strategy?
How much gas does Gazprom sell abroad?
In 2012 Gazprom supplied 203.2 billion m3 of natural gas abroad.
What countries does Gazprom supply gas to?
- Gazprom Group’s gas sales structure in 2012
Gazprom is one of the primary suppliers of natural gas to European consumers and accounts for roughly one-third of aggregate gas import to Western Europe. Export deliveries of Russian gas began in the mid-1940s to Poland. In 1967 Russian gas was delivered to Czechoslovakia. In 1968 Russian gas was supplied to Western Europe under a contract with Austrian OMV. In 2012 Russian pipeline gas was fed to more than 30 countries within and beyond the FSU.
- Gas supplies to Europe in 2012, billion m3
- Gas supplies to the FSU in 2012, billion m3
In 2012 Gazprom supplied a total of 138.8 billion m3 of gas to Europe. As of today, the largest buyers of Russian blue fuel are Germany, Turkey and Italy.
In 2012 gas supplies to the CIS and Baltic States accounted for 64.4 billion m3.
What are Gazprom’s international partners?
Gazprom’s key international partners are: E.ON, BASF, Wintershall Holding, Verbundnetz Gas and Siemens (Germany), GDF SUEZ, EDF and Total (France), Eni (Italy), Botas (Turkey), Fortum (Finland), Gasunie and GasTerra (the Netherlands), DONG Energy (Denmark), Statoil (Norway), OMV (Austria), CNPC and PetroChina (China), GAIL (India), Sonatrach (Algeria), Petrovietnam (Vietnam), PDVSA (Venezuela), MOL (Hungary), PGNiG (Poland), SPP (Slovakia), Srbijagas (Serbia), Bulgarian Energy Holding (Bulgaria), Kogas (Korea), Mitsui, Mitsubishi Corporation (Japan) and transnational Shell.
It is not a complete list of the Company’s international partners as Gazprom actively cooperates with foreign companies in executing a broad range of joint projects in addition to gas supplies.
Under what terms and conditions does Gazprom export gas?
Gazprom exports gas to European countries mainly under long-term contracts (up to 25 years) concluded, as a rule, on the basis of intergovernmental agreements.
Long-term arrangements are the foundation for steady and reliable gas supplies. Only long-term deals can guarantee the producer and exporter’s returns on multibillion dollar investments required for the implementation of major gas export projects, and assure steady and uninterrupted gas deliveries for the importer in the long run.
Long-term agreements with major buyers typically contain a take-or-pay provision meaning that the customer agrees to pay for a certain minimum amount of gas even when a lesser amount was physically offtaken. For prominent gas suppliers, such as Gazprom, this is an indispensable guarantee of the buyer’s responsibility.
Do Gazprom’s export prices differ from those for the domestic gas consumers?
- Average gas sales price (net of VAT, excise tax and customs duties), RUB per 1,000 m3
Yes, they do. Export supplies are significantly more expensive. For example, in 2011 Russian blue fuel was supplied to Western Europe at the prices approximately 4.1 times higher and to the CIS and Baltic States – more than 3.1 times higher than those for Russian consumers.
How are Russian gas prices set for the CIS countries?
In 2006 Gazprom completed a transition to the market based pricing principles for gas consumers in all of the CIS and Baltic countries. As a result, gas prices for the FSU have grown twofold to threefold and are gradually reaching European levels. At the same time, when generating price offers for each of the countries, Gazprom gives consideration to a degree of their integration with the Company’s gas business. Special attention is paid to the development of market based cooperation with the major countries transiting Russian gas to Europe – Ukraine and Belarus. At present, there is a clear differentiation between contracts for gas supply to Ukraine and contracts for gas transit via its territory. The market principles of relationship are fixed in a five-year gas supply and transit contract signed with Belarus.
The transparency of Gazprom’s relationships with transit countries is beneficial to all parties and is indispensable for securing the reliability of Russian blue fuel deliveries to European consumers.
What is the basis for a high end-consumer gas price in Europe? Does Gazprom have opportunities to sell gas to end consumers abroad?
The price level for European consumers mainly depends on the cost of gas transmission services. Gazprom sells most of its export gas at the border of the importing country to local distributors that subsequently supply it to end consumers. The end-consumer price includes the cost of gas transmission via low pressure pipeline networks maintenance of which is several times more expensive than in Russia, plus taxes.
Gazprom’s marketing policy provides for optimizing the costs of gas transit to Western Europe and gaining access to the end consumer. For this purpose, the Company is activating various forms of participation in the European gas distribution business.
For instance, back in 1993 Gazprom and German Wintershall established the Wingas joint venture owning around 2,000 km of pipelines in Germany and Europe’s largest Rehden underground gas storage facility with the capacity of over 4 billion m3. At present, Gazprom holds 50 % less one share in the joint venture. Thus, participating in Wingas, Gazprom is a co-owner of Germany’s gas transmission networks.
- Gas transmission system of WINGAS
Under the agreement with Eni, Gazprom Export, a foreign trade subsidiary of Gazprom, was entitled to independently sell over 3 billion m3 of gas in the Italian market.
Gazprom’s strategy of gaining access to the end consumer is evolving in the CIS market.
ZAO ArmRosGazprom is supplying gas to the Armenian market and selling it to each and every group of end consumers.
Since April 1, 2008 the Company’s subsidiary, Gazprom Sbyt Ukraine, has been supplying gas directly to industrial consumers in Ukraine. In 2011 supplies equaled 3.35 billion m3.
What impact does the European gas market liberalization have on Gazprom’s export policy?
Gazprom’s international business activities are carried out in full compliance with the applicable legislation in the countries of Gazprom Group’s presence. Recent developments in the European Union legislation aimed at the liberalization of the gas market influenced both organizational issues of the business activities and contracts for gas supplies to the EU member states.
Pursuant to the new regulations, Gazprom’s companies removed the contract provisions that restricted reselling the Russian blue fuel.
Supporting the EU efforts to shape a single European energy market, Gazprom believes – and major European energy companies share this opinion – that the basic architecture should be comprised of long-term arrangements for blue fuel supply to secure stability, reliability and predictability of the gas market.
European consumers are committed to their long-term agreements with Gazprom. Thus, GDF SUEZ (France) has renewed its gas import contract until 2030, E.ON Ruhrgas (Germany) – until 2035, Wintershall Holding (Germany) – until 2030, Gasum (Finland) – until 2026, RWE Transgas (Czech Republic) – until 2035, Eni (Italy) – until 2035. Contract extensions until 2027 and new arrangements were agreed on with Austrian EconGas, GWH and Centrex. Contracts were concluded with Romanian Conef Energy for the period from 2010 to 2030, Swiss WIEE for the period from 2013 to 2030, German WIEH until 2027, Czech Vemex for the period until 2013, Italian Premium Gas until 2024 and Sinergie Italiane up to 2022.
Gazprom is alert to the legislative initiatives under consideration in the EU and constantly takes part in discussing the issues that may have a negative impact on the natural gas market and impair the situation for all the players. In particular, the proposal to prohibit natural gas suppliers from acquisition of large gas transmission projects in which they frequently invested their own funds causes concern.
This may lead to a lack of funds and an increase in transmission costs and, therefore, have a negative effect on the gas supply reliability.
What place does liquefied natural gas hold in Gazprom’s export strategy?
- LNG deals effectuated by Gazprom Group, thousand t
As for new markets, OAO Gazprom’s marketing strategy provides for increasing supplies of both pipeline gas and LNG.
Gazprom Group has been consolidating its positions in the LNG market since 2005 by spot and swap deals effectuated by Gazprom Marketing & Trading. Between 2005 and 2012 the total volume of LNG sales amounted to 8.3 million t (11.0 billion m3).
Taking into account the increased scope of LNG trade and marine freight, a special subsidiary company, Gazprom Global LNG, was established in August 2008 to do the LNG business.
In order to be an early entrant into the LNG market, OAO Gazprom has studied the opportunities of taking part in the existing LNG projects by means of acquisition or asset swap.
In 2007 Gazprom became one of the Sakhalin II project participants. Within the project, Russia’s first LNG plant was put into operation in February 2009. In 2010 the plant surpassed its design capacity (9.6 million t per year) by producing over 10 million t of LNG. In 2012 the plant produced 10.9 million t of LNG. The entire output was contracted out based on long-term arrangements. The first carrier containing Sakhalin LNG arrived in Japan in April 2009.
The agreements for LNG supplies from Sakhalin were signed with Shell Eastern Trading Ltd. and Gazprom Global LNG in April 2009. Pursuant to these agreements, Sakhalin Energy will supply some 1 million t of LNG per year to each of the purchasers between 2009 and 2028.
Moreover, in December 2012 Gazprom Group completed the first LNG supply via the Northern Sea Route (NSR). The successful voyage of the Ob River LNG carrier chartered by Gazprom provides for the opportunity of the full-scale use of the NSR for Russian gas supplies both to the countries of the Asia Pacific and to the European market.
