Abstract
The non-Gazprom gas producers (NGPs) doubled their share of the Russian domestic gas market between 2000 and 2010 and have continued growing since then. For several years especially Novatek expanded. More recently, Rosneft has emerged as a key player, not least through its purchase of TNK-BP. This article begins with an overview of the companies in the Russian gas sector, their resource bases and capacities, and subsequently examines whether differences in field development costs and export market access may make it rational for Gazprom to continue ceding market share to the NGPs. With rising costs of Gazprom's queue of greenfield developments, any delays in Gazprom's investment program may be compensated through increased NGP production. The article argues that the NGPs are ready to fill the gap, may be allowed to do so and are already increasing their market share in an increasingly competitive market. The stage may now be set for a continued gradual transformation of the Russian gas market, in which the interests of Gazprom and the NGPs may be complementary or may be pitted against each other, but those of the Russian Federation are in any case likely to be better fulfilled than in the past.
Highlights
Russia possesses nearly a quarter of the world's proven natural gas reserves and produces around 18% of world output, second only to the US (BP, 2012; IEA, 2012)
Russia's official Energy Strategy projects that Russian consumption will grow from about 450 to 600 BCM and that demand for Russian exports will increase by 40% in the period 2010–2030 (Energy Strategy Institute, 2009)
This might be due to the marginal cost and revenue dynamics described above, but another explanation is probable: Novatek and other non-Gazprom gas producers (NGPs) are set on increasing their market share, whether Gazprom likes it or not
Summary
Russia possesses nearly a quarter of the world's proven natural gas reserves and produces around 18% of world output, second only to the US (BP, 2012; IEA, 2012). As shown, in the coming 10–20 years an increasing share of Gazprom's production will have to come from new fields Recent developments such as Yen-Yakhinskoe, South Russkoe and West Pestsovoe in the Nadym-Pur-Taz area, which have all come on-stream since 2005, are relatively cost-efficient, being located close to the existing pipeline grid and other infrastructure (Henderson, 2010). These mega-projects represent the very core of the Russian gas future, so delays and ambiguities in decision-making on investments give rise to concerns about future security of supply These projects are not the only contributors to Gazprom's production forecast: even if both Bovanenkovo and (less likely) Shtokman proceed as planned, other projects further east as well as in the Ob-Taz Bay are planned to deliver 150 BCM by 2020 and 230 BCM by 2030 (Pirani, 2011). If Gazprom should fail to deliver on its projections, there should be room to expand NGP output, as long as overall demand is sufficiently high
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