Transcript RUSSIAN DOMESTIC GAS MARKET Dr. Tatiana Mitrova 21 June

RUSSIAN DOMESTIC
GAS MARKET
Dr. Tatiana Mitrova
21 June, 2016
39th Annual IAEE International Conference
Bergen, Norway
420 West 118th Street, New York NY, 10027 | @ColumbiaUEnergy | energypolicy.columbia.edu | [email protected]
Russia`s GDP expectations are revised downwards
Russian GDP dynamics, (2012=100%)
190
Energy Strategy-2030
Baseline (2009)
170
Energy Strategy-2035
High (2014)
150
Energy Strategy-2035
Baseline (2014)
130
110
Energy Strategy-2035
Baseline (2015)
90
Energy Strategy-2035
Risk analyses (2015)
Source: Russian Economic Ministry
2
2025
2024
2023
2022
2021
2020
2019
2018
2017
2016
2015
2014
2013
2012
2011
2010
70
Domestic gas consumption is stagnating
Russian gas demand dynamics by sector in 1990-2013
bcm
600
Other
500
Residential
400
300
Industry and
feedstock
200
Centralized
heating
Power
100
Gas pipelines own
needs
2000
2001
2002
2003
2004
2005
2006
2007
2008
2009
2010
2011
2012
2013
2014
2015
2016
2017
2018
2019
2020
2021
2022
2023
2024
2025
0
Sources: Rosstat, ERI RAS, Energy Ministry
3
Increasing gas bubble in the domestic market
Company
Production in 2015, bcm
Unutilized potential and
capacities additions
under development by
2020, bcm
Gazprom
406
~155
Novatek
52
~48
Rosneft
42
~48
VIOCs (APG)
46
~15
635,5
266
TOTAL
Rosneft and Novatek have extremely ambitious plans on gas production
expansion, Obligatory utilization of the associated petroleum gas (APG)
and its priority pipeline access stimulates VIOCs gas output growth
4
Aggressive price wars are becoming the only way to
secure market niche, but Gazprom is obliged to supply
at higher regulated prices
Estimated gas sale prices of the
main Russian gas producers, 2013
Two-sector gas market model
Regulated prices
>
Free prices
RUB/mcm
Source: Source: T.Mitrova, G.Molnar “Russian Gas Market:
Entering New Era”, Cedigaz 2015
5
Domestic gas prices are frozen again
Russian average weighted wholesale gas prices for industrial
consumers in 1998-2016
RUB/mcm
6000
$/mcm
160
140
5000
120
4000
100
3000
80
60
2000
40
1000
20
2016
2015
2014
2013
2012
2011
2010
2009
2008
2007
2006
2005
2004
2003
2002
2001
2000
1999
0
1998
0
Wholesale industrial prices, RUB/mcm (left axis)
Wholesale industrial prices, $/mcm (right axis)
Sources: Rosstat, Federal Tariff Service of the Russian Federation, ERI RAS,
6
At oil price below 45 $/bbl, the price of equal
profitability is below the regulated price
Equal profitability price in Moscow at different oil prices compared to
the regulated price
RUB/mcm
12500
Equal profitability
price in Moscow
(exchange rate 1$
= 70 RUB)
10000
7500
5000
Regulated price in
Moscow in 2016
2500
0
20
25
30
35
40
45 50 55
OIl price, $/bbl
60
65
70
75
80
Source: ERI RAS calculations
There is increasing pressure for domestic gas price freeze or even reduction
from the global market dynamics and growing domestic oversupply
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Saint-Petersburg Exchange: more than 12 bcm sold on
spot basis since 2014 mainly under regulated prices
Trading volumes
1800
1600
1400
1200
1000
800
600
400
200
0
Number of gas sellers
Number of gas buyers
Source: SPMEX
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There are increasing imbalances in the stakeholders
positions
IGPs
Gazprom
State
Needs higher tax
revenues
Wants to control
export projects for
geopolitical
reasons
Worries about gas
affordability and
social stability
9
Gas
producers
Regulated low
prices make new
investments not
attractive
Responsibility for
economically
unattractive
investments in
gazification
Obligations to
supply “social
consumers”
Stakeholders interests: Russian State is the major
stakeholder with extensive agenda, regarding gas as an
important domestic and international political tool
State
 Security of gas supply
for the domestic
consumers including
sensitive regions and
social groups
 Low transportation tariffs
Gazprom
IGPs
 Company`s
 Company`s
profitability and
financial
sustainability
profitability and
financial
sustainability
 Stable production
 Access to the new
volumes
markets domestically
and abroad
 Low gas prices
 Non-discriminatory
affordable for the
industry and for the
population
pipeline and storage
access
 Ensure politically
 Stable production
important infrastructure
projects and external
gas policy
volumes
 Ensure tax revenue
growth from the gas
industry
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Consumers
 Acceptable (low) gas
and electricity prices
 Reliable supplies
(including for the
non-payers)
 Gazification
 Transparent and
easy access to gas
supply services
Gas market reform options
Nationalization of the gas industry
Status quo
Gradual improvement of the
market mechanisms
Upstream competition with
centralized transportation, storage,
domestic sales and export
• All national gas production, transportation, sales and export under
control of a single national gas company
• No changes
• Gradual improvement of the transportation tariff methodology, access to the
underground storages, liquidation of the most obvious contradictions.
• UGSS unbundling into a number of competing private gas producers, selling their gas
on the wellhead and a separate state-controlled company, responsible for domestic
and export supplies and being the “guarantying supplier”.
Transportation unbundling
• UGSS as a separate state-controlled company, production and supply performed by
the competing private companies. Proportional export (through a single export
channel?).
Complete Anglo-Saxon type gas
market liberalization
• Complete Gazprom`s unbundling, complete gas export liberalization. Pricing at the
gas exchange.
All gas market reform options seem unattractive and
risky, especially in the crises environment, so any
profound changed are postponed
Inefficiency
 Complete gas industry
nationalization
 Competition in production
and state-owned company
responsible for
transportation, supply and
export
Supply security
threats
 Gazprom`s unbundling
and creation of
“Transneft”-type
transportation company
 Complete Anglo-Saxon
type market liberalization
 Status-quo and minor adjustments of the institutional framework
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Thank you
For more information contact
Mitrova Tatiana
Email: [email protected]