Russia: liberalisation on pipeline gas exports?

President Vladimir Putin has ordered the Russian government to consider breaking Gazprom’s monopoly on pipeline gas exports by allowing other producers to export from new fields in eastern Siberia and the far east.

Rosneft has lobbied hard to gain a bigger piece of the Russian gas sector.

While the government will not make a final decision on liberalisation until 1 September, a decision to do so would offer Rosneft a piece of Russia’s US$ 400 billion gas deal with China and potential access to the planned US$ 55 billion Power of Siberia pipeline that will link eastern Siberian gas production to China.

Another potential winner from the deal would be Surgutneftegaz, which also has new gasfields in the region.

Russian far-east

The island of Sakhalin had become the stage for a legal showdown between Rosneft and Gazprom.

Rosneft, the world’s largest oil company, has filed a suit with the Sakhalin Region’s court of arbitration against the Sakhalin Energy company, demanding to be provided with access to its gas pipelines.

However, the case is in essence a direct challenge to Gazprom, since the world’s largest producer of natural gas is the main shareholder in Sakhalin Energy.

Sakhalin Energy is the operator of Sakhalin-2, Russia's only LNG project. It develops two offshore deposits in Sakhalin, with estimated recoverable reserves of 150 million t of oil and 500 billion m³ of gas.

"According to Gazprom, Sakhalin does not have sufficient gas transportation capacity for both companies' projects. So the question is which of the two companies will take the burden of making additional investment in infrastructure," explains Investcafe analyst Grigory Birg.

The head of research at United Traders, Mikhail Krylov, points out that "access to pipelines is a long-standing bone of contention between the two oil and gas companies," however, "competition in this sector should be boosted for the sake of de-monopolisation".

"The issue here is not so much about access to the Power of Siberia as about a further liberalisation of the gas market and about the opportunity for independent producers to export gas or to demand better terms from Gazprom when buying gas from it," Grigory Birg believes.

Confrontation between the two Russian energy giants is likely to continue at the international level, he adds.

Edited from various sources by Elizabeth Corner

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