Is Gazprom Losing its Point?
In an article for the Jamestown Foundation, Jiri Kominek writes that Gazprom’s days as the world’s largest gas supplier could be numbered, in addition to its position as the spearhead of Russian foreign policy.
In 2008, Russia’s state-owned gas monopoly accounted for 17 percent of global output. However, Gazprom's position has been diminished by a combination of factors including, technological advances, the global gas glut and competing suppliers seeking new markets.
Led by technological breakthroughs including horizontal drilling and fracturing that have allowed for the commercial extraction of shale gas, the US has now passed Russia in terms of global gas production.
It appears that the old style Russian propaganda machine has been reclaimed and refurbished from the archives reserved for relics of the cold war.
Gazprom management had been downplaying the impact that shale gas would have on meeting global demand for gas, particularly for Europe, its largest customer.
“We do not see the conditions for shale gas to have a serious impact on the European market”, Gazprom CEO Alexei Miller told journalists with confidence on April 9.
However, Kominek writes that some of Russia’s own gas experts say that Europe’s shale gas deposits could eventually meet 47 percent of demand within the EU after it was learned that countries such as Poland possess substantial reserves.
Shale gas development is in its very early stages in Europe and it is far to early to determine the long term impact on the market. However, this does not really help Gazprom, as Europe can obtain LNG from Qatar and other sources which experts say is significantly cheaper than Russian gas, which is pumped through its vast network of pipelines.
Recently, Gazprom management publicly conceded defeat to technological progress and announced that the company is considering entering the US shale gas market.
The article concludes that Gazprom, the Kremlin's traditional spearhead of foreign policy of late, is losing its point.
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