Gazprom

Topics: Natural gas, Gazprom, Nord Stream Pages: 6 (1528 words) Published: October 30, 2014

Gazprom impact on world-wide gas market.

Table of contents
1.0 Terms of reference
2.0 Procedure

3.0 Findings

Gazprom is a global energy company. Its major business lines are geological exploration, production, transportation, storage, processing and sales of gas, gas condensate and oil, sales of gas as a vehicle fuel as well as generation and marketing of heat and electric power. What is natural gasGazprom views its mission in reliable, efficient and balanced supply of natural gas, other energy resources and their derivatives to consumers. Gazprom holds the world’s largest natural gas reserves. The Company’s share in the global and Russian gas reserves makes up 18 and 72 per cent respectively. Gazprom accounts for 14 and 74 per cent of the global and Russian gas output accordingly. At present, the Company actively implements large-scale projects aimed at exploiting gas resources of the Yamal Peninsula, Arctic Shelf, Eastern Siberia and the Far East, as well as hydrocarbons exploration and production projects abroad. Gazprom is a reliable supplier of gas to Russian and foreign consumers. The Company owns the world’s largest gas transmission network – the Unified Gas Supply System of Russia with the total length of over 168 thousand kilometers. Gazprom sells more than half of overall produced gas to Russian consumers and exports gas to more than 30 countries within and beyond the former Soviet Union. Gazprom is the only producer and exporter of liquefied natural gas in Russia. The Company is among Russia’s five largest oil producers and it is the largest owner of power generating assets in the country. These assets account for 17 per cent of the total installed capacity of the national energy system. OAO Gazprom’s strategic goal is to establish itself as a leader among global energy companies by diversifying sales markets, ensuring reliable supplies, increasing operating efficiency and using scientific and technical potential.

3.1 Gazprom in world economy

Gazprom’s monopolistic position is not derived from any special characteristics of its product. It exploits and controls the majority of Russian gas resources but it is not the only gas producer in the world. Gazprom’s position results from control- ling the most pipelines transporting gas to its users in entire Europe and in various parts of Asia.

Gas dispatch is a network industry with monopolistic position derived from the existence of one system of transport. This is the case of Gazprom, with the dominant part of its production cost created by the cost of pipeline system. In consequence, competition is naturally eliminated because of an extremely high cost of entering the market4. In Russia Gazprom possesses 463 000 km of pipelines (Paniuszkin and Zygar 2008, p. 7). It still constructs the new ones in Russia as well as abroad (even outside Europe).

3.2 Gazprom and european market

Gazprom’s market position in Europe is improving as a result of large and growing demand for natural gas. In 1996 Gazprom sold 123,5 bcm and in 2001 its sales in- creased slightly to 126,1 bcm. However, a really huge increase in sales occurred in the next years. In 2006 Central and Western Europe purchased from Gazprom 156,1 bcm of gas. The increasing consumption of gas results from the fact that natural gas has become a substitute for more and more expensive crude oil.

With an increasing demand for natural gas dependence of the EU on the im- port of natural gas is growing rapidly (Figure 3). In 2005 41% of the EU demand for gas was covered with its own production. Soon more than half was imported. After the next ten years, in 2015, import dependence of the EU will have been as large as 75%.

European dependence on natural gas sold by Gazprom can be derived from the information about the overall share of gas import (Figure 4)...
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