Structural power in Russia's gas sector: The commoditisation of the gas market and the case of Novatek

Abstract

Over the last 20 years, Russia has taken several initiatives in order to become an LNG producer of global relevance. Failing to achieve this status for long while being instead a natural gas producer and exporter, Moscow has undertaken an ambitious reform process of the domestic gas system. Challenged by international market developments, including the commoditisation of gas and the transformation of historical features of the international gas trade, Russia has allowed new companies to surge and fulfil Kremlin’s strategic goals. By the means of supporting productive and technologic innovations through a number of policy initiatives, Moscow has altered historical structures of the gas system, extending unparalleled fiscal and institutional measures in the Russian energy context. Therefore, the traditional primacy of state-owned Gazprom is increasingly challenged and a new private company, Novatek, has emerged as the main advocate of Russia’s LNG strategy. Through the application of production and structural power concepts, the article provides insights on the power dynamics over the configuration of country’s LNG production and export policies, both between the Russian state and the gas companies, and between the same companies. From this, Novatek rises as the institutional winner and legitimate promoter of country’s interests. Also, it favours company’s interests in other structures, like in the Russian gas export policy. These findings could be relevant to the study of state and market relations in other LNG producers, in particular those countries where the state has a long history of involvement in energy policy and strategy formulation.