Transcript Dia 1

Russian Gas Market Perspective
Alexey GROMOV
Ph.D, Deputy General Director
Institute for Energy Strategy
14th December 2011
1. Importance of Russian GAS for Russia and for Europe
2. Current situation in Russian Gas Industry
3. Regulation context
4. Russian gas market perspective
GAS industry is not dominate in Russian Economy
Energy sector
Gas Industry
12%
31%
GDP
12%
67%
Export revenues
6%
49%
Budget revenues
Russian revenue from fossil fuel exports exceeded
Source: IES
$255 billion in 2010 (from which only $46 billion is GAS)
…but Russian Economy strongly depends on GAS
Domestic primary energy consumption
55%
69%
Fuel Mix in the Electric Power Sector
Source: IES
Since 1990 till 2010 the gas share in domestic energy consumption
has grown with 43
to 54%
Since 1990 till 2010 the gas share in fuel mix in the Electric Power
Sector has grown with 55
to 69%
Europe depends on Russian GAS…
The share of Russian Gas in EU-27 Gas
consumption (2010)
own production
The share of Russian Gas in EU-27 Gas
import (2010)
31%
Russia
Russia
Norway
Norway
Algeria
Algeria
Others
Others
23%
…but the level of dependence is declined
Source: IES
… however some European countries can’t do
without Russian GAS
Finland
Slovakia
Greece
Serbia
Czech Republic
More than
50%
Bulgaria
Turkey
Austria
Hungary
Poland
Germany
Romania
France
Italy
Belgium
the Netherlands
0
20
40
60
80
100
The share of Russian gas in national domestic gas consumption, 2010
Source: IES
Russian GAS also strongly depends on
European gas market
The Structure of Russian Gas
deliveries, 2010
The Scheme of the Unified Gas Supply System (UGSS)
• EU-27 provides almost 70% of Russian gas export deliveries in bcm
• EU-27 provides more than 85% of Russian gas export revenues in $
• The current Russian system of Gas pipelines (UGSS) is oriented to the Europe
1. Importance of Russian GAS for Russia and for Europe
2. Current situation in Russian Gas Industry
3. Regulation context
4. Russian gas market perspective
Structure of Russian Gas Industry:
Gazprom and others…
Gas production
Gazprom (78%)
Independent gas producers (70 companies – 9%)
Oil companies (9%)
PSA-operators (4%)
Regional gas companies (less than 1%)
Gas processing
Sibur (95% owned by NOVATEK) – more than 50%
Gazprom (25%)
Oil companies (25%)
Gas transport
Gas distribution
Gazprom (100%)
Gazprom (75%)
Independent regional companies
Gas export
Gazprom Export (100%)
Resource base : high level of concentration
The Structure of Russian gas
reserves (ABC1) by companies
Distribution of balance reserves of free gas (ABC1+C2,) by
territories and offshores, tcm
• Russia provide more than 23% (1st place) of proven world gas reserves (48,2 tcm)
• 69% of Russian gas reserves owned by Gazprom
• 60% of Russian balance (registered) reserves being located in
Yamal-Nenets Autonomous Region
Natural gas production: crisis is overcome
Gas production in Russia, 2000-2010 in bcm and in % to the previous year
During the crisis 2008-2009 Russian gas production has fallen to 15% (on 81 bcm)
Independent gas producers attack Gazprom
Leading companies in the independent sector
Since 2000 the share of IGP companies has grown from 10% to 22% in 2010
Gas transport system needs renovation…
bcm\year
700
TFC at reconstruction and new building
600
500
Capacity
decrease up
to 230 bcm
400
TFC without reconstruction
300
200
100
0
2005
2010
2015
2020
2025
2030
Source: IES
Age structure of the UGSS*, 2010
The dynamics of technically feasible capacity (TFC) of UGSS, 2005-2030
• The average operating life of major pipelines has reached 25 years
• TFС of UGSS has fallen to 7-8% compared to design specifications
• Only current TFS renovation need more than $ 2 billion per year
* UGSS – Unified Gas Supply System
Domestic gas consumption slowly growing
450.0
bcm
2.9
2.9
1.4
300.0
415.7
2.2
400.0
350.0
%
3.6
350.6
1.2
360.7
364.9
375.5
2.2
383.9
2.3
406.4
3.1
413.4
396.3
408.6
392.3
3.5
2.5
1.5
0.5
2000 2001 2002 2003 2004 2005 2006 2007 2008 2009 2010
-0.6
-0.5
-1.5
-2.5
250.0
-3.5
-4.1
200.0
annual growth rates, 2000-2010, %
-4.5
Commercial domestic gas consumption, bcm
Source: CDU TEK, Gazprom
• Since 2000 domestic gas consumption has growth to 17%
• Average annual growth rate is not exceed 2,1%
• Gazprom provides 75% of domestic gas deliveries
Domestic gas consumption structure is stable
Contribution of main consumer groups in gas
consumption growth, 2000-2010
Domestic gas consumption structure, 2000-2010
• Electric power sector is the largest gas consumer in Russia (36%)
Russian gas export is stable too…
Russian natural gas export , bcm (2000-2010)
Europe is the main export destination
for Russian GAS
Export of Russian gas to the CIS by country, 2010
Export of Russian gas to Europe by country, 2010
• Germany, Turkey, Italy, France and Poland accounted for 60%
of Russian gas export to Europe
• Ukraine and Belarus are dominated in the CIS region
Russian LNG: first steps to the East
Chronology of the realization
of Sakhalin-2 Project
1994
Start PSA Project Sakhalin-2
2007
Entering Gazprom in the project
2009
LNG plant starts in operation
2010
LNG export exceeds 10 mt
• 6,6% LNG share in Russian gas export
• 6,6% Share of Asia-Pacific in export
• Fast growth of LNG export covers
the export decrease to the Europe
Sakhalin -2 Project
1. Importance of Russian GAS for Russia and for Europe
2. Current situation in Russian Gas Industry
3. Regulation context
4. Russian gas market perspective
GAS export regulation: one export channel
Federal law about ONE EXPORT CHANNEL (on 20th July 2006) grants the exclusive right for gas
exports to the organization that owns the UGSS or its subsidiary, i.e. Gazprom (Gazprom Export)
LAW excludes the concurrence between Russian companies in the international gas market
The unified rate of the custom duties is 30% (except the gas deliveries to the countries of Custom
Union – Belarus, Kazakhstan)
The average level of taxes in the gas industry essentially is less than in the oil industry
Transit regulation (transit rate through territory of Ukraine is $ 2,89 per 1000 cm per 100 km in 2011)
The total volume of transit payment for Ukraine exceed $ 3,6 bln
The average cost price of Russian GAS (1000 cm) to the German border, 2011
Gas
extraction
$15
Gas
transport
Taxes and custom
duties
$30
$24
Transit
payment
$33
Average
cost price
$102
Long term contracts and export prices
Dynamics of average export prices of Russian natural gas,
2000-2010 ($ per 1000 cm)
Prices at the NGC spot trading site (Germany)
and the prices of Gazprom’s long term contracts
at the German border, 2009-2011
• The base of Russian gas export are long term contracts (for 20-25 years) “take or pay”
• The price of Gazprom’s long term contracts is linked to the world oil price with a delay
of 6 months
• Long term contracts are predicted and reliable, but aren't flexible
Domestic gas market is still regulated…
Domestic gas market
Regulated Sector
Unregulated Sector
70%
30%
Domestic gas market legislation
• The federal law of the Russian Federation «About natural monopolies» from August, 17th, 1995 №147-ФЗ;
• The federal law of the Russian Federation «About gas supply in the Russian Federation» from March, 31st, 1999
№69-ФЗ;
• The governmental order of the Russian Federation (with changes and additions) «About measures on streamlining of
state regulation of the prices (tariffs)» from March, 7th, 1995 №239;
• The governmental order of the Russian Federation «About state regulation of the prices for gas and tariffs for services
in its transportation for territories of the Russian Federation» from December, 29th, 2000 №1021;
•The governmental order of the Russian Federation «About an order of an establishment of special extra charges to
tariffs for transportation of gas for financing of programs of gasification» from May, 3rd, 2001 №335;
•The governmental order of the Russian Federation «About carrying out of experiment on realisation of gas on an
electronic trading platform» from September, 2nd, 2006 №534;
•The governmental order of the Russian Federation «About perfection of state regulation of the prices for gas» from
May, 28th, 2007 №333;
•The governmental order of the Russian Federation «About perfection of state regulation of the prices for gas» from
December, 31st, 2010 №1205.
Domestic gas market: regulated sector
Average wholesale gas prices for Russian consumers, 2000-2011
(roubles per 1000 cm)
• Gas prices are set by the Federal Tariff Service (FTS)
• Prices are differentiated by price zone and consumers categories (industry and
households)
• Average prices for the industry are above than for the households
Domestic gas market: unregulated sector
Unregulated sector
Free contractual
(negotiated) prices
Electronic
trading floor
(2007-2008)
• Independent gas producers (IGP) and oil
companies
• Gazprom, IGP and oil companies
• Prices are linked to the Gazprom’s prices
• Number of sellers is 14
• Contractual prices is a commercial secret
• Number of buyers is 59
• Total sales volume of gas is 13,25 bcm
• Number of contracts is 3120
• Average contract price for 38% above the
average regulated price
Experiment with electronic trading floor will be continued
in 2012-2014
1. Importance of Russian GAS for Russia and for Europe
2. Current situation in Russian Gas Industry
3. Regulation context
4. Russian gas market perspective
System of strategic documents to develop
the Russian gas industry
Energy strategy up to period
2030 (ES-2030)
Federal Level
Industrial Level
General scheme of development of the gas industry
for the year 2030 (GS-2030)
Regional Level
Eastern
Gas
Program
Business
level
Conception of the state
program for exploration and
exploitation of the continental
shelf of the Russian
Federation
Program of longterm development
of the fuel and
energy complex of
the Russian Far
East
Investment programs of oil&gas companies
• ES-2030 is an ideology of development
• GS-2030 is an industry roadmap of development
• Investment programs are the concrete realization of development
Russian gas production up to 2030
bcm
ES-2030 (min)
ES-2030 (max)
GS-2030 (min)
GS-2030 (max)
Source: ES-2030, GS-2030
Gas production up to 2030 (according to ES-2030 and GS-2030)
Potential gas production is sufficient to meet any demand
Changes of Russian gas production map
8
Others
0
new areas
Far East
25
3
East Siberia
4
Ob-Taz lip
2030 min
65
45
68
67
0
Yamal (peninsula)
2030 max
87
85
2005
185
0
Bolshekhetskaya
depression
3
European part
220
32
30
137
131
46
323
317
Nadym-Pur-Taz
0
100
200
300
400
bcm per annum
585
500
600
700
New areas (Yamal, Eastern Siberia and Far East) will
provide more than 40% of Russian gas production up to
2030
8
Targets of gas export: shift to the East
200
bcm per annum
150
CIS
100
Europe
AsiaPacific
50
0
2005
2015 min 2015 (max) 2020 min
2030 max
2030 min
2020 max
2020 min
2015 max
2015 min
2010
2005
2020
(max)
2030 min
2030
(max)
353
390
359
336
311
310
220
256
0
50
100
150
200
250
bcm per annum
300
350
400
450
Western gas policy in ES-2030: key projects & goals
• Preservation of the occupied share in
the European gas market
(more than 30% in EU-27)
 South Stream (projected)
• Increase of gas export revenues
(275 bln USD in 2010)
• Security of Russian gas deliveries to
Europe, including transit questions
• Maintenance of status quo in Caspian
Region
 Nord Stream-2 (end 2012)
• Using of Russian gas infrastructure to
export Caspian gas to EU-27
30
Eastern gas policy in ES-2030: key projects & goals
• Share of Eastern Siberia and the Far East
in gas production – 14-15%
• LNG share in gas export – 14-15%
• Share of the countries of the Asia-Pacific
Region in the structure of gas export – 20%
 LNG Projects in Sakhalin
 Natural gas Export to
China
Export expectations vs. reality
bcm
Russian Gas Export forecast up to period 2030
400
375
368
350
349
325
300
300
275
15-20%
250
225
203
175
150
2008 (факт) 2009 (факт)
Forecast 2030 max
Europe:
 Competition growth
US:
 refuse of future
Russian LNG (the boom
of shale gas production)
Asia-Pacific:
 competition growth
(Central Asia)
234
200
Factors of decrease in
export expectations
2010
2015
Forecast 2030 min
2020
2030
Our expectationes
Risk of decrease in export on 15-20%
Domestic gas market: shift to net-back prices
Tariff regulation in 2011-2015 will change as follows:
– Transfer to long term tariffs
– Synchronisation of investment programs of the natural monopolies
– Regulation of reliability and quality of services offered
– Information disclosure by natural monopolies (their activities)
– An increase in energy efficiency of electricity, gas, heat and water consumption
– Increasing the effectiveness and transparency of the regulatory bodies activities
for gas industry
- a transfer to equal profitability prices for domestic and external consumers (netback prices)
- abolishment of cross-subsidising in the wholesale and retail gas markets
- a transfer to equal profitability gas prices has a smooth transitional character, to
avoid price shocks for domestic consumers
Conclusions
• Preserving the leading role on the European gas market
• The increased trust between Gazprom and its customers in Europe and CIS
Main goals
Main
risks
• Take more than 10% of the Asia-Pacific gas market
• Get into the LNG market of South Asia and South America
• Stabilization of demand for Russian gas in Europe
• The high investment and price risks in China
• The high level of competition on the LNG market
• The quality of presence on the market is more important than quantity
• Exit on new level of relations with the EU (US-Canada, EU-Norway etc.)
Main
• The aggressive policy in the LNG market
opportunities
The Energy of the Future in our Hands
Thank you for your attention
www.energystrategy.ru
Alexey GROMOV
Deputy General Director
Institute of Energy Strategy, Moscow