Gazprom and the Energy Sector(2006)

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GAZPROM
What are the key resources that have enabled Gazprom to be successful? Are they sustainable? What are its key vulnerabilities? - One of the major strengths of Gazprom is ownership of large reserves of natural gas, though this is something that is not sustainable. Its monopoly ownership of major network of pipelines (UGSS of Russia) was a major advantage, providing Gazprom virtual control over the domestic transmission system in Russia. This removed any danger of competition from domestic oil producers who also had the ability to produce gas from their operations. The other obvious strength was close ties with the government, all the way since inception. This was in a way a boon and a bane. It was a boon as it helped them anchor oft impossible deals as well as get first-hand information of available opportunities in the domestic and world market, through representation by the President himself in many cases. It proved to be bane as the government planned to control prices in the domestic market. Thus I observed that some of its key strengths are also its vulnerabilities. The biggest challenge faced by Gazprom is decreasing gas reserves in its existing production field and facilities that were ageing out; which was offset to some extent because of its cordial ties with FSU countries like Turkmenistan, from where they imported gas in order to meet with supply commitments. These countries were also looking for other transportation options for their own gas without having to depend on the UGSS. The other vulnerability was strong opposition from the EU, through the charter on Energy Cooperation that was signed in 1990 by 51 countries except Russia, which would affect the heavily inter-dependent customer base in Western Europe. Evaluatation of Gazprom’s international moves.

- Gazprom made a wide variety of international moves over the years between the years 2005-2008, which was part of a large strategy to strengthen its control over the domestic energy...
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