Natural gas: Risks and rewards for Gazprom boss
The long-term prospects for the gas market are looking good, in spite of the current price pressures, the chief executive of Gazprom Export told CNBC.
The natural gas industry has expanded rapidly in the last few years with the U.S. becoming a net exporter of the commodity after discovering shale gas reserves.
All this has boosted the supply of natural gas around the world. Alexander Medvedev, whose company is currently in pricing talks with its European customers, predicted that the company's annual export of natural gas will exceed 160 billion cubic meters, compared with last year's 138.8 billion. Prices have fallen by 15-20 percent since the financial crisis erupted in 2008, but he is confident of an eventual return to health in the market.
(Read more: How much does a shale gas well cost?)
In spite of the rapid expansion in production in the U.S., profit prospects for the shale gas industry are less certain. Industry experts have pointed out that gas rigs need frequent, expensive, updating to continue extraction – and generally have a shorter shelf life than oil wells, for example. This can mean that price falls hit margins.
There is also speculation that China's own shale gas reserves might help it increase its use of gas without having to pay to foreign-owned companies. However, the first results of drilling there are "much worse" than in the U.S., Medvedev pointed out.
Potential sources of new gas reserves include troubled Greece, which Gazprom had been linked to. Medvedev said that the country had "a number of risks we can't take" at the moment.
Medvedev also dismissed a high-profile anti-trust investigation by the European Commission into Gazprom as "generated by political motivations, not economic performance". The Commission is investigating allegations that Gazprom manipulated the gas market by hindering the free flow of gas. Medvedev will appear in front of the Commission later in October.
- This article has been updated to reflect that Alexander Medvedev was talking about natural gas as well as shale gas.
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