Russia: A New Gas Strategy Emerges

A Gazprom subsidiary recently issued a report recommending a dramatic change of strategy for the Russian gas industry. It determined that Russia should decrease exports of natural gas to European markets and concentrate instead on developing new gas fields to keep up with domestic demand.

The Research Institute for the Economics of the Gas Industry, NIIGazekonomika, determined in its late 2005 report that domestic consumption of natural gas is increasing at a faster pace than projected in
Russia’s two-year-old Energy Strategy.
The company, a fully owned subsidiary of Gazprom responsible for researching economic and management issues, stated that Russia should focus on developing new gas fields in the Yamal Peninsula and other locations in order to meet future domestic demand.

Failure to do so could have a seriously detrimental impact on Russia’s future economic growth, the report warns.

But ensuring domestic supplies would also require that Russia decrease exports of natural gas to European markets, according to the report, which notes the potential consequences for the CIS, Asian-Pacific, and European gas markets.

..Gazekonomika concluded that:

– Russian domestic gas consumption is rising faster than projected in Russia’s Energy Strategy, which was announced in May 2003 and is the foundation of the country’s energy designs through 2020. The new Gazekonomika study estimates that by 2030 domestic demand will be approximately 654 billion cubic meters (bcm) per year, compared to the Energy Strategy’s estimate of 436 bcm.

– Gas-conservation technologies are not being implemented and the Russian economy remains highly energy intensive.

– A dangerously narrow gap exists between the cost of production of gas and its domestic price.

Radio Free Europe