U.S. News

Gazprom Can Raise Planned Output if Required


Russian gas export monopoly Gazprom could raise production to 670 billion cubic meters (bcm) a year by 2020 rather than the planned 590 bcm, if the market needs more gas, a senior executive said on Thursday.

"This increase is not only linked to the boom of the Russian economy, but also to the gas consumption boom in the Asia-Pacific region and our plans to access LNG (liquefied natural gas) markets," deputy CEO Alexander Ananenkov said.

Last year the company produced 556 bcm.

Gazprom has been criticized by industry experts such as Claude Mandil of the International Energy Agency for not investing enough to raise production in line with new demand from Europe, where North Sea fields are becoming depleted.

On Sunday another Gazprom official said Gazprom's European market share, now around 27%, would grow to 33% by 2010.

Analysts were skeptical.

"We think that this is a very high share and are frankly puzzled as to how the company is going to implement this and serve the domestic market at the same time," said Oleg Maximov at Troika Dialog.

But Ananenkov said Gazprom would have no problem raising its game if the market demanded it.

"Gazprom alone can in theory produce 900 bcm a year if the market wants it."

"During the harsh winter of 2005-6 Gazprom was producing 1.7 bcm a day to meet huge market demand, which would represent 620-630 bcm in annual figures. Tell me who else has muscles like this, to sell such volumes when the market needs it?"

He added that the Soviet-era Gosplan state planning agency had foreseen production of 1.3 trillion cubic meters per year in 2005.

Ananenkov reiterated that Gazprom would put its two biggest production projects on stream on time -- Yamal by 2011 and Shtokman by 2014.

Yamal's potential gas reserves amounted to 50 trillion cubic meters, more than Russia has at the moment, he said. The cost of production there would be $20/1,000 per cubic meters, $5 above lifting costs on Zapolyarnoye, the most recent field put on stream by Gazprom.

He said Shtokman could yield as much as 94 bcm a year at its peak, of which half would be pipeline gas and half LNG.

"Given the dynamics of LNG market development, the proportions could be adjusted."