• Natural Gas News

    How Gazprom Sees It

    old

Summary

Viktor Zubkov aired Gazprom's grievances with Europe and the latter's policies that have put a crimp in his company's plans.

by: Drew Leifheit

Posted in:

Top Stories, , South Stream Pipeline, Turk/Turkish Stream, News By Country, Russia

How Gazprom Sees It

In his address to delegates at the European Gas Conference this week in Vienna, Austria, Gazprom's Chairman of the Board of Directors, Viktor Zubkov, began by speaking of the future of natural gas in view of the economic crisis in Europe, but went on to air the company's grievances with Europe and the latter's policies that have put a crimp in Gazprom's plans and criticized the economic sanctions against Russia.

Noting that the situation for the company had become worse last year with the drop in oil prices, gas prices had also changed, he said. Mr. Zubkov spoke of how this has affected investment cycles for things like pipelines, which might not generate revenues for 20-25 years, so investments weren't happening. He offered, “And this could lead to lack of supplies for consumers, who may have to pay high prices [for gas].”

Gas export revenues, he said, are important for producer countries, who oftentimes subsidize energy prices. According to him, this was also a budget risk for importers of natural gas. “It's in the interest of both sides of the gas market to find the so-called 'golden middle' – neither too high, nor too low – a stable price.”

He also said that a reliable and long-lasting energy supply is important.

In his speech in Vienna, Mr. Zubkov also criticized EU rules, saying: “Bad rules can only lead to a worse situation, and that's what we see now on the European gas market with the 3rd Energy Package.”

He also referred to Europe's “demonization of exporters, especially those from Russia,” but insisted that Russia is the most reliable gas partner for Europe. “We've been working for Europe for the past 47 years and Europeans need to understand there are long-term goals for the producers as well as for consumers.”

Meanwhile, the demand for gas in Europe, he explained, has decreased for the 4th year running, a decrease of 50 BCM from 2011-2014.

Mr. Zubkov queried, “When import is going down, how can we invest? Where will the funds come from when consumption is at 68%?”

The EU's approach regarding South Stream, he said, had been unreasonable. While he said Gazprom has the ability to build infrastructure and increase the energy security of Europe, then it also has the right to use that infrastructure. Referring to the cancellation of the pipeline project, he recalled, “Because it was an unreasonable risk for Gazprom, the structure of the project changed.”

By re routing its gas through Turkey via the so-called “Turk Stream,” gas deliveries to the EU would depend on other European partners, he said.

Gazprom, he said, will remain a reliable partner, but Europe needs to change its approach, cooperate and listen. If it is willing to hold negotiations, Russia will be a reliable supplier for many years to come.

In reference to the economic sanctions placed on Russia, Mr. Zubkov said they are negative for both Europe and Russia, but that the latter was now manufacturing things that its European partners had been supplying previously, things like 4,000 gas compressor stations.

He quipped, “So, who won here? We actually produced them ourselves, and it's similar for other products.”

In closing, Mr. Zubkov called for a dialogue between Russia and Europe.

Taking the stage just after, Gazprom's Deputy Chairman of the Management Committee, Alexander Medvedev, expressed his disappointment that no representative of the European Commission was in attendance at the conference in Vienna to engage in such dialogue.

-Drew Leifheit