Dramatis Personae: Putin and Miller
It is a historic tradition to personify all events in Russia. The country has never been a democracy and too much in the life of ordinary people and the whole nation depended on a single autocrat’s wills and whims. The oil and gas industry is not an exception. When a company gets stronger or weaker, when companies plan a merger or takeover, in the eye of a Russian beholder it is always reflected as a result of decisions made by a senior boss or his closest friends. And frequently, pecuniary motives are suspected.
The last session of the presidential energy commission on February 13 provoked the same kind of suspicions among industry watchers.
Addressing the members of this body, Vladimir Putin made a couple of statements, which could signal a very interesting change in his attitude toward the energy strategy of Russia and a new pattern of figures in his circle.
He snubbed Gazprom chairman Alexey Miller saying that demand of gas, if it is going to grow, will increase in Asia rather than in Europe. (Just a few months ago Miller assured Putin that Europe would need 200 bcm a year of additional gas from Russia.) Then he went on to admit that the shrinking volume of gas exports meant a huge loss for the national budget—as if did not know that Gazprom was carrying out his instructions of insisting on high prices instead of trying to maintain its market niches.
To make it even more painful for Miller, Putin hinted at a possibility of gradual liberalization of gas exports by lifting the ban on LNG sales by companies unassociated with Gazprom.
Observers concluded—perhaps prematurely—that the Russian president was inclined to cut down the scope of Miller’s personal influence and control over the influx of gas export revenues and allow other persons in his entourage to get a piece of this pie. It is Igor Sechin, the CEO of Rosneft, and Gennady Timchenko, a principal owner of Novatek, in an alliance with Leonid Mikhelson, who will see themselves strengthened immensely if their companies are allowed to export LNG.
It is too early for the competitors of Miller to start celebrating. When Sechin was describing great prospects of LNG production in Arctic projects, Putin suddenly asked how the developers were going to transport that gas because the Northeastern passage can be navigable just four or five months a year.
The president showed he was aware of the problems the Russian LNG projects are facing, and evidently suspected that even an adequate technical solution would not be enough to make Russian LNG commercially competitive. It means that the CEO of Gazprom can still enjoy benevolent looks of his boss until Sechin, Timchenko and Mikhelson can prove that their gas projects are better than the traditional inflexible approach of Miller.
Published with the kind permission of RusEnergy. Mikhail Krutikhin is with RusEnergy, an independent privately-run company established in 2000 by a group of Russian experts with a long experience in consulting and publishing business. Based in Moscow, it specializes in monitoring, analysis and consulting on oil and gas industry of Russia, Central Asia, Azerbaijan and Ukraine.