Title: Domestic constraints: affecting Russian Natural Gas Export to Europe
1Domestic constraints affecting Russian Natural
Gas Export to Europe
- Marina Tsygankova
- 29-30 September 2005
- Stockholm School of Economics
- in Saint-Petersburg
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5Uncertainties
- Big three fields- Medvezhe, Urengoy, Yamburg
are under decline (the fields provide 63 of
current Gazproms current production production
and compensation is needed - Gas price reform development gradual price
increase is projected - EU gas market liberalization leads towards
shorter contracts, gas-to-gas competition
6- A numerical optimization model is used to study
the effect on optimal allocation between domestic
gas sale and export depending on different
levels of the Russian domestic gas price toward
2015 - Different scenarios for future production
capacities and future share of exports tied to
long-term contracts
7- Gazprom
- Government holds 50
- Produces 86of Russian gas
- Controls 64 of Russian gas reserves
- Owns Russian gas transportation system
- Independent
- gas producers oil companies, gas companies
- Produce 14 of Russian gas
- Control 30 of Russian gas reserves
Regulated price
Long and short term contracts
Domestic consumers
Export
8Model
- Gazproms profit maximization problem
- ?G PDQDPKQKPE (QE)QE CG(QDQEQK)
- Subject to constraints
- QD QE QK ? K
- QD QI D(PD)
- QI ? SI (PD,M),
- where SI (PD,M) is the solution to the profit
maximization problem of the independednt
producers, that is - SI (PD,M)minM, arg CI(X)PD
9Scenarios production capacity of Gazprom
- In 2004 Gazproms produced 540 bcm
- In 2002 Gazproms production targetto achieve
and maintain annual natural gas production level
at 530 bcm through 2010 - big three fields Medvezhye, Urengoy and
Yamburg account for 63 of Gazproms current
production ( 340 bcm) - Conjectures about the big three fields
production by 2015 give a range of 150-270 bcm - Yamal and Shtokman production in Barents Sea is
likely to start after 2010 or even later - Satellite fields production has to increase to
compensate decline. - We model three scenarios for Gazproms production
capacity in 2015 - 500 bcm, 540 bcm, 580 bcm
10Scenarios independent producers production
capacity
- In 2004 independent producers supplied 80 bcm to
the domestic market - The Russian Energy Strategy 2020 (2003) By 2015
independents can reach 120-135 bcm of own gas
production - Landes,A., et.al (2004) independents have a
potential to produce 180 bcm into the market
already by 2010 - We model three scenarios for independent
producers production capacity 80 bcm, 120 bcm,
160 bcm
11Scenarios Long-term export contracts
- In 2004 Russia exported to Europe 140 bcm to
Europe - Russian Energy Strategy 2020 (2003) exports to
Europe by 2015 will be 190 bcm - Gazproms current average duration of export
contracts is 15-20 years - Fellers (2004), Pipeline and Gas Journal only
one third of the gas traded in Europe will be
sold at short-term contracts or spot markets in
2015 - We use 120 bcm as a base scenario for the volume
of Russian gas export sold at long-term contracts - Quick and slow EU gas market liberalization
scenarios - 50 bcm and 190 bcm
12The domestic price reform
- Governments strategygradual growth of domestic
price on natural gas - Since 2000 domestic price raised annually by
10-20 13/bcm in 2000 vs.27/bcm in 2004 - Russias Energy Strategy 2020 (2003) domestic
price to reach 64 by 2015 - We run the model for price range 37-57
13Russian gas export to Europe depending on
Gazproms production capacity
14Russian gas export to Europe at different
long-term contract volumes
15Total Gazprom production at different levels of
long-term contract volumes
16Russian gas export to Europe at different levels
of independent producers supplies
17Conclusion
- The increased domestic gas prices in Russia will
increase export possibilities - Under the current Gazproms production capacity
or lower , domestic prices have to be raised if
Russian export targets should be reached - domestic-market-comes-first principle will
slow down export volumes when the production
capacity is scare - Smaller shares of long-term contracts as a result
of liberalization of the European gas market may
create an upward pressure on gas prices due to
Gazproms strategic actions in the export markets