24 November 2010
Non Gazprom Gas Producers in Russia

"by James Henderson, Oxford Institute of Energy Studies, 2010. "

By: A book review Nicholas Newman
This book by James Henderson, who is currently Head of Russia for Lambert Energy Advisory in London as well as a Senior Visiting Research Fellow at OIES, provides a useful insight into the intricacies of the Russian domestic gas market. It not only describes in a concise and knowledgeable manner the complex organisational interrelationships between gas producers, brokers, investors and government agencies, but also comments on how these various stakeholder relationships have evolved over time since the beginning of the post-soviet era to the present day.

However, based on my own experience as a writer and researcher on Russian energy, I found this thorough analysis of the geopolitical complexities of this subject informative.

This book details how Gazprom and the independent gas producers, such as Novatek and Lukoil, emerged out of the chaos of the 1990’s to the present day. It examines how the geo-political developments both inside Russia and in Europe, have influenced the market, including how the collapse in European gas prices has slowed or put on hold indefinitely Gazprom’s ambitious plans to develop the high cost and technically difficult fields in the high Arctic of Siberia. It details the role that non-Gazprom production from both domestic and imports from Central Asia has played in meeting the needs of the domestic market. In addition, it examines the ability of non-Gazprom producers to replace the proposed new capacity that Gazprom had planned to develop in the high Arctic. In fact, James Henderson describes how non-Gazprom producers can develop cheaply sufficient output to meet expected growth in the domestic market for years to come, from their existing assets.

In addition, this book identifies and details the major non-Gazprom producers, their strategies, prospects, as well as their relationships with government agencies. As a regular commentator on this topic, I appreciated James confirming my own view about the importance that companies place on maintaining a good relationship with the Kremlin, to ensure a prosperous outcome.

What is clear from reading this book is that the Kremlin is looking beyond Gazprom to meet Russia’s future energy needs. The business case for developing quickly the Gazprom fields in the high Arctic no longer exists, due to the impact of the economic crisis, increased competition in the European market from new non-Gazprom sources, including the United States and Qatar. Russia can no longer depend on its export customers subsidising development of new fields for its domestic market!

The writer supports my own view that new opportunities are opening up for non-Gazprom producers to take a more important role in meeting the needs of the domestic market. James Henderson describes what policy changes are taking place, what further reforms are necessary to encourage increased non-Gazprom output in the years to come.

However, this book briefly covers the immense difficulties the Kremlin faces from vested interests determined to maintain the status quo. It is clear that for foreign investors that, there will be new and interesting prospects working with Russian partners in implementing the Kremlin’s gas production ambitions. In addition, the problems facing the Russian Federal government are vast in implementing these policies. Above all, it needs the full commitment to such policies from all sectors of society if it is to succeed; nevertheless, getting such support takes time.

In conclusion, it might be said that the Russian jungle is becoming a slightly safer place for investors?

To order a copy please email margaret.ko@oxfordenergy.org

ISBN 978-1-907555-16-9, pp. 252, 124 figs, 11 maps
Price £20.00 - Published November 2010.




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