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Russian authorities consider ending Gazprom export monopoly

Published time: December 20, 2012 13:07
Edited time: December 20, 2012 17:07
RIA Novosti / Aleksey Nikolskyi

RIA Novosti / Aleksey Nikolskyi

Russian gas major Gazprom could lose its status of an export monopoly as Russian authorities have reportedly backed the idea to allow independent energy firms to sell LNG abroad.

The country’s Ministry of Energy, Ministry of Economy, Ministry of Natural Resources and the Federal Anti-Monopoly Service (FAS) approved the proposal by independent gas producer Novatek to abolish the gas export monopoly, Kommersant daily reports.

The authorities are divided on what kind of energy companies should be granted the right to export gas. The Ministry of Economy proposed granting the right to a wide range of producers, while the FAS said it should be given to companies not associated with Gazprom. The Ministry of Natural Resources insisted that only companies that to date have obtained licenses for gas exploration.

Currently Gazprom is the only company allowed by legislation to export gas from Russia. Independent producers have to strike deals for export with the gas holding companies. However, independent gas producer Novatek reportedly started gas deliveries to European clients through a Swiss trader in October.

The Ministry of Energy has also proposed creating an administrative body which would control gas exports by Gazprom as well as independent suppliers, and to resolve potential conflicts between independent and state-owned exporters. The ministry has also proposed to undertake these functions.

Last month Russia's Energy Minister Aleksandr Novak said his ministry is considering allowing other energy companies to export liquefied natural gas (LNG), but the minister added that there is no final decision.

"In theory there are possible options specifically for LNG," Novak told reporters. "What form to use and what system of agreements with Gazprom Export and others — it would need to be developed specifically."

According to Ministry of Energy data Russian gas production would increase slightly to 677bn cubic metres in 2012 from 671bn in 2011. The production could rise to 950bn cubic metres per year by 2030 with growing demand mainly from Asia.

Gazprom’s monopoly was seriously questioned when independent gas producer Novatek started its ambitious Yamal LNG project. The company said it faces problems with attracting loans as it didn’t sign any agreements with Gazprom Export. “We have to realize that we would manage this ambitious project only if the legislation changes,” Gennady Timchenko, the co-owner of Novatek told Forbes Russia. ”If Gazprom Export fails to fulfill the obligations and let us sign long-term agreements,” he said.

Meanwhile, Russia's Novatek has started gas deliveries to Germany’s EnBW in October. Novatek reportedly sells gas to European clients through Swiss trader Novatek Gas&Power

"We have started supplies. They are profitable," Novatek Deputy CEO Mikhail Popov said. He didn’t rule out that the company will make new deals in the near future. “Why not, if we could offer a good price?”

In August 2012 Novatek announced it had signed a 10-year contract with EnBW for the supply of about 2 billion cubic meters (bcm) of gas a year. EnBW said it would spend about 600 million euros over 10 years for the gas.

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