Russian gas - through the crisis and beyond. (GW)
Wood Mackenzie’s recently completed Russia Gas Multi-client Study - Finding Equilibrium: A New Era for Russian Gas shows that Russian gas production has been severely hit by the destruction of European and domestic gas demand. Production is expected to recover to 2008 levels by 2013, with Gazprom’s recovery to pre-crisis levels forecast in 2014.
Major development projects are likely to be further delayed, or developed in a phased manner to reflect market conditions. Whilst we believe that Bovanenko will be brought onstream as scheduled in 2012, we forecast a more gradual ramp up in production, reaching its plateau of 132 bcm in 2024. Wood Mackenzie does not expect the Shtokman project to come onstream before 2017 for piped gas, and 2018 for LNG exports.
The current crisis has highlighted Gazprom’s dependence on the European gas market. We expect to see continued commitment from Russia to develop East Siberian and Far East fields and infrastructure, allowing diversification of gas exports to China to take place by 2018.
Central Asian gas, most notably Turkmen gas, has traditionally played a key role in the overall Russia gas balance. With Turkmenistan’s diversification of gas exports to China, Turkmenistan’s dependency on Russia has decreased. However, Russia’s need for Turkmen gas has also decreased, with imports from Turkmenistan plummeting from 42 bcm in 2008 to 11 bcm in 2009. Future export volumes of Central Asian gas to Russia will ultimately depend on the speed of recovery of European gas markets, with Turkmen gas exports unlikely to exceed 30 bcm in the short term.
Our study shows that Russia’s gas production will continue to grow, and its share of the European gas market will gradually increase from 26% in 2009 to 30% in 2030. Whilst Gazprom’s priority is to secure export revenues from Europe, it will no doubt continue to focus on its vast domestic market, and push for domestic gas price reform, which could provide huge upside potential for its revenues.
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