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Gazprom vs. other Russian gas producers: The evolution of the Russian gas sector
Abstract and Figures
The non-Gazprom gas producers (NGPs) doubled their share of the Russian domestic gas market between 2000 and 2010 and have continued growing since then. For several years especially Novatek expanded. More recently, Rosneft has emerged as a key player, not least through its purchase of TNK-BP. This article begins with an overview of the companies in the Russian gas sector, their resource bases and capacities, and subsequently examines whether differences in field development costs and export market access may make it rational for Gazprom to continue ceding market share to the NGPs. With rising costs of Gazprom's queue of greenfield developments, any delays in Gazprom's investment program may be compensated through increased NGP production. The article argues that the NGPs are ready to fill the gap, may be allowed to do so and are already increasing their market share in an increasingly competitive market. The stage may now be set for a continued gradual transformation of the Russian gas market, in which the interests of Gazprom and the NGPs may be complementary or may be pitted against each other, but those of the Russian Federation are in any case likely to be better fulfilled than in the past.
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... At the beginning of the pandemic crisis, the oil-exporting states were facing a devaluation of their main natural resources [8,9]. Although these nations should be capable of enduring the crisis in the long run and reaping the advantages, they suffer as a result of its acute emergencies; short-term bankruptcy is threatened by dwindling demand and lowering prices. ...
... [10]. At the beginning of the pandemic crisis, the oil-exporting states were facing a dev uation of their main natural resources [8,9]. Although these nations should be capable enduring the crisis in the long run and reaping the advantages, they suffer as a result its acute emergencies; short-term bankruptcy is threatened by dwindling demand a lowering prices. ...
... 15, x FOR PEER REVIEW 11 of The regression model(8) for the Core Price Index variation in Romania. In blue is represented the initial data, in red the regression model, in brown the logistical component of CPI variation (including the oil price dependence), and in green the cyclical component of CPI variation. ...
This study examines the response of the Consumer Price Index (CPI) in local currency to the COVID-19 pandemic using monthly data (March 2020–February 2022), comparatively for six European countries. We have introduced a model of multivariate adaptive regression that considers the quasi-periodic effects of pandemic waves in combination with the global effect of the economic shock to model the variation in the price of crude oil at international levels and to compare the induced effect of the pandemic restriction as well and the oil price variation on each country’s CPI. The model was tested for the case of six emergent countries and developed European countries. The findings show that: (i) pandemic restrictions are driving a sharp rise in the CPI, and consequently inflation, in most European countries except Greece and Spain, and (ii) the emergent economies are more affected by the oil price and pandemic restriction than the developed ones.
... Gazprom was granted control over most of Russia's natural gas reserves, as well as the ownership of gas transportation systems and the exclusive right to export natural gas. However, in recent years, competition in the domestic market has led to the rise of Rosneft and the privately-owned company Novatek, which succeeded to obtain the liberalization of export rights for liquefied natural gas (LNG) in 2013 (Lunden et al., 2013;Reuters, 2013). Gazprom's internationalization to India remained limited till the mid-2010s due to lower demand for natural gas in the Indian energy sector. ...
Purpose
The authors revisit the traditional OLI paradigm with the objective to allocate politics within the set of internationalization advantages by building on the political strategy literature. The authors outline the specific role of political advantage that facilitates and propels the international expansion of state-owned multinational enterprises (SOMNEs) from emerging markets.
Design/methodology/approach
A conceptual paper which explains the role of political advantage in the internationalization of SOMNEs. The authors expand the scope of the OLI to capture the impact of firms' home governments' policies and relationships with host countries which are leveraged by SOMNEs in their internationalization.
Findings
The authors define political advantage as a new type of advantage which depends on and is sourced from external actors. The authors argue that P-advantage is a multifaceted and unstable part of POLI composition, which is contingent on political shifts and may be leveraged by various firms. The authors also assert that political capabilities have limitations in sustaining political advantage, which may be compensated via enhancing the political activity of firms.
Originality/value
The authors conceptualize the POLI-advantages paradigm for the internationalization of SOMNEs by proposing that in addition to the traditional ownership, location, and internalization advantages, firms can capitalize on their political advantage to enter markets where internationalization might have been difficult without their political connections.
The post-Cold War unipolar world order is being challenged in both North East Asia and the broader Eurasian Arctic not by the emergence of multilateral political institutions, but rather by what I conceptualise as a geo-economic process of Polycentric Regionalism. The rising great power ambitions of Russia and China - with substantial economic spheres of overlapping regional interests (i.e. their neighbouring Dongbei / Russian Far East and Arctic territories), has led to their adoption of a geo-economic strategy to begin to alter the present international system by creating two new physical and geopolitically relevant, regional "spaces" in the Arctic: the terrestrial Pacific Arctic, and via the instrumentalization of technology, the fourth dimension of (celestial) Space. Both activities (the Pacific Arctic/Space) now strategically link North East Asia with Europe, physically and virtually, via combination of Russia’s North East Arctic corridor maritime access, Sino-Russian joint Space /cyberspace activities, and China’s Belt and Road Initiative platform. Through original case studies of the natural gas/ Liquefied Natural Gas (LNG) industry, situated in Russia’s Arctic, as well as joint Sino-Russian technology Research and Development initiatives, I argue that the gas/LNG industry's geo-economic power - transmitted through capital, infrastructure build-out capabilities, and economic influence over institutions - is the key determinant in facilitating the physical connectivity and virtual linkage aspects of Polycentric Regionalism. By generating new economic dynamism in the shared space(s) and thereby building trust for bilateral commitments, Russia and China can create the Pacific Arctic region as an experimental step in establishing a viable alternative to the economic and security order in Asia, shaped largely to date by the U.S. The significant Sino-Russian trust gained via the Sino-Russian gas play acts as a strategic Confidence Building Measure for more sensitive collaboration in dual-use technologies, that may in turn progress the relationship from one of geo-economic partnership (gas/LNG) in the Pacific Arctic space, to possible geostrategic alliance (via technology-based activities) in the Arctic’s fourth dimensional arena – the domain of Space and Cyberspace. It is by these means that China and Russia can convert geo-economic, geostrategic, and associated econo-governance processes, into the crucial underpinnings of their geopolitical aim; a new, multiregional-based international order for the 21st century.
Over the last 20 years, Russia has taken several initiatives in order to become an LNG producer of global relevance. Failing to achieve this status for long while being instead a natural gas producer and exporter, Moscow has undertaken an ambitious reform process of the domestic gas system. Challenged by international market developments, including the commoditisation of gas and the transformation of historical features of the international gas trade, Russia has allowed new companies to surge and fulfil Kremlin’s strategic goals. By the means of supporting productive and technologic innovations through a number of policy initiatives, Moscow has altered historical structures of the gas system, extending unparalleled fiscal and institutional measures in the Russian energy context. Therefore, the traditional primacy of state-owned Gazprom is increasingly challenged and a new private company, Novatek, has emerged as the main advocate of Russia’s LNG strategy. Through the application of production and structural power concepts, the article provides insights on the power dynamics over the configuration of country’s LNG production and export policies, both between the Russian state and the gas companies, and between the same companies. From this, Novatek rises as the institutional winner and legitimate promoter of country’s interests. Also, it favours company’s interests in other structures, like in the Russian gas export policy. These findings could be relevant to the study of state and market relations in other LNG producers, in particular those countries where the state has a long history of involvement in energy policy and strategy formulation.
This thesis explores uncertainties in global gas resources and markets. Whilst global gas consumption growth has been strong in recent years, the need to shift the global energy system to net zero has raised significant questions about the role of gas in this transition. In addition to the global context of addressing climate change, gas markets have undergone significant shifts in recent years, driven by a multitude of factors including, but by no means limited to, rapid production growth from unconventional gas in the United States, rapidly increasing demand in China, and increased competition along the gas supply chain. This thesis finds that if global temperatures are to be kept towards-1.5oC, then gas consumption needs to peak now. Significant regional variations were found in this result, with European and North American demand declining from the present day, whilst key Asian markets (including China) see consumption growth to 2035 but then rapid decline. Therefore, several transition risks are identified in this work. This also has implications for price formation across different import markets, with a significant result from this thesis suggesting that prices in major Asian (e.g. China and Japan) markets converge, whilst European prices remain consistently lower. To generate novel insights in this thesis, two models were used, which have been soft linked to generate consistency of inputs and outputs. The existing TIMES Integrated Assessment Model at UCL (TIAM-UCL) provides long-term insights into the role of gas in the wider energy system, particularly under ambitious decarbonisation pathways. Additionally, a new global GAs Production, Trade and Annual Pricing model (GAPTAP), provides a novel representation of gas markets, with insights into regional price formation mechanisms, investment in new fields, the role of associated gas on price formation mechanisms, and variations in government revenues from gas production.
At the end of the 1960s, the change in the foreign policy of West Germany, traditionally known as Ostpolitik, led to the rapprochement with the communist states of the East, notably the USSR, whose energy industry was booming at the time. This situation enabled the USSR to establish political and economic relations with West Germany, which were strengthened with the export of Russian natural gas in 1973. Due to the great success of this relationship, both governments decided to go further and created a project to trade cheap Russian gas in exchange for German steel and technology.
Thereafter, in the context of European construction at the beginning of the 21st century,
began the Russian-European partnership, thanks to which Europeans came to regard Russia as a reliable and desirable supplier, especially compared to Middle East countries. However, at the time that Russia improved its relations with Europe, it saw deteriorate its relations with Ukraine, a key country in ensuring the outlet of Russian gas to the EU. The year 2014 saw the emergence of antagonisms between Russia and Ukraine, to the point of changing the latter's political structure. The EU condemned Russia's hostility to Ukraine and the German
government then took the lead in negotiations to resolve the crisis. Nevertheless, Berlin was torn between defending European interests and defending its own interests. The project Nord Stream 2 was questioned and severely criticized. Based on neorealist theory, this research aims to explain how the gas deals between Russia and Germany were affected by the 2014 war between Russia and Ukraine.
During an intense period of only 14 months, from June 2010 to August 2011, six major cooperation agreements between oil companies were announced in Russia. Almost all of these partnerships involved offshore projects, with an international oil company as one of the partners and Rosneft as the other. The agreements were concentrated along Russia’s Arctic petroleum frontier, and the three that survived the longest involved oil or gas extraction in the Arctic. This article analyses and compares the contents and contexts of the agreements, to ascertain what they have to tell about access for international companies to Russia’s offshore petroleum resources and the influence of competing Russian political actors over the country’s petroleum sector. The article argues that the new partnerships did represent an intention to open up the Russian continental shelf, and that the agreements were driven and shaped by a series of needs: to secure foreign capital and competence, to reduce exploration risk, to lobby for abetter tax framework, to show the government that necessary action was being taken to launch exploration activities, to improve Rosneft’s image abroad, and either to avert or prepare for future privatisation of state companies such as Rosneft.
During an intense period of only 14 months, from June 2010 to August 2011, six major cooperation agreements between oil companies were announced in Russia. Almost all of these partnerships involved offshore projects, with an international oil company as one of the partners and Rosneft as the other. The agreements were concentrated along Russia's Arctic petroleum frontier, and the three that survived the longest involved oil or gas extraction in the Arctic. This article analyses and compares the contents and contexts of the agreements, to ascertain what they have to tell about access for international companies to Russia's offshore petroleum resources and the influence of competing Russian political actors over the country's petroleum sector. The article argues that the new partnerships did represent an intention to open up the Russian continental shelf, and that the agreements were driven and shaped by a series of needs: to secure foreign capital and competence, to reduce exploration risk, to lobby for a better tax framework, to show the government that necessary action was being taken to launch exploration activities, to improve Rosneft's image abroad, and either to avert or prepare for future privatisation of state companies such as Rosneft.
This article explores the influence of socio-economic discontent on the determination of decision makers to cut subsidies on natural gas for Russian households. The authors outline first the organisation of gas supplies and subsidies, and secondly the relationship between policymaking signals and public opinion concerning the minor price adjustments implemented so far. They then examine previous cases of discontent in other sectors, extrapolating implications for a major increase in gas prices. The conclusion is that Russian policymaking is characterised by a pattern of ‘two steps forward, one step back’: decision makers are concerned about discontent, but nonetheless they ultimately press on with reform.
The dataset upon which this article is based is freely available from here: https://www.researchgate.net/publication/264045716_Dataset_on_energy_as_a_tool_in_Russian_foreign_policy
You are welcome to use the dataset as you like as long as you cite our article as the original source.
Explanations of Russia’s foreign energy policy typically focus on major events, such as the gas conflicts with Ukraine, and argue that these events represent simplistic patterns of behavior, reflecting the policy-makers’ emphasis on politics, commercial gain, corruption, or ad hoc opportunism. This analysis goes beyond these explanations to argue that the Russian leadership pursues a rational set of political and economic goals in its foreign energy policy, but that it is constrained in its efforts by the set of tools available to it. To understand the resulting patterns of behavior, it is necessary to devote more analytical attention to Russia’s foreign policy tools and their limits. The article draws on a new dataset of Russia’s policy tools in 31 energy conflicts with 20 countries from 2000 to 2010. These conflicts are defining moments in Russia’s foreign policy because they put to the test the toolkit that Russia has assembled to impose its will on a counterpart. The study finds increased use of transit pipelines, generally decreased use of subsidies and persistent use of efforts to purchase assets in foreign countries, cutoff pipeline supplies, and attempts to use energy to achieve specific political goals. By emphasizing the tools that Russian policy-makers use to conduct policies, the article provides a more nuanced analysis of the capacity and limits of Russian foreign energy policy than is currently available.
Reducing Russia,s high levels of Associated Petroleum Gas (APG) flaring has been high on the Russian political agenda since 2007. In 2009 a decree requiring APG utilization of minimum 95 percent was adopted, valid from 1 January 2012. The oil industry has implemented various measures to reduce flaring, but not to a sufficiently large extent to make the 2012 deadline. This paper concludes that the utilization goal could be reached within 3–5 years if there is political will and the oil industry is given appropriate enabling measures. However, in a time of economic insecurity, domestically as well as in Russia’s primary export market in Europe, maintaining the status quo to ensure political stability is likely to be prioritized by the authorities at the expense of investments and structural reform which may be a premise for reaching the APG utilization goal.
The widening gap between EU gas production and consumption may require an 87% increase of import volumes between 2006 and 2030, and there are great uncertainties regarding the amounts of gas that can be expected from new suppliers. The potential of increased production from Norway and Algeria is limited; hence, Russia is likely to play a crucial part of meeting the anticipated growing gas demand of the EU. A field-by-field study of 83 giant gas fields shows that the major producing Russian gas fields are in decline, and by 2013 much larger supplies from the Yamal Peninsula and the Shtokman field will be needed in order to avoid a decline in production. Gas from fields in Eastern Siberia and the Far East will mainly be directed to the Asian and Pacific Rim markets, thereby limiting its relevance to the European and CIS markets. As a result, the maximum export increase to the European and CIS markets amounts only to about 45% for the period 2015-2030. The discourse surrounding the EU's dependence on Russian gas should thus not only be concerned with geopolitics, but also with the issue of resource limitations.
In order to provide a comprehensive picture on the relationship between Russia and the EU, the focus should be on both the external energy relationship as well as Russia's internal organization. This paper sets out to do this by combining both strands of research in order to arrive at recommendations for Europe on the way to adjust its energy policy towards Russia. The emphasis is on whether or not Russia should impose unified gas pricing. Main conclusions are that the perceived advantages of unified Russian gas pricing to Russia as well as Europe are in fact overstated and that EU security of supply might worsen under unified gas prices. Three policy recommendations are that EU policy should (1) more explicitly acknowledge the interdependence between Russia and Europe; (2) not push Russia towards unified gas pricing; and (3) not take for granted any increase in Russian exports flowing to Europe.