Gazprom CEO sees Russian dominance of European gas market

Gazprom CEO sees Russian dominance of European gas market
Russia is due to export even more gas to Europe this year, beating last year's all-time record, according to Gazprom CEO Aleksey Miller. The new Nord Stream-2 pipeline will increase Gazprom’s share of the European market despite competition from Qatar and the US.

"Today, in 2017, we are beating our 2016 record highs by around 10 percent. So we can expect a new record this year, and Gazprom's European market share is poised to rise," said Miller in an interview with Reuters.

Gazprom sold 179 billion cubic meters (bcm) of natural gas to Europe last year thanks to lower prices and cold weather on the continent.

According to Miller, the market share of Russian gas in Europe will continue to grow at least until 2035, as the continent’s output falls. The EU will need an additional 100 bcm of gas in the next 18 years, and Gazprom is ready to supply the bulk.

"A decrease in North Sea gas production, as well as in other EU countries, is becoming a very important factor... Given that, Russia's market share will be rising," said Miller.

On Monday, Gazprom partners Engie, OMV, Royal Dutch Shell, Uniper and Wintershall agreed to finance half of the €9.5 billion Nord Stream-2 project. The pipeline will double Nord Stream’s existing capacity, which delivers natural gas to Germany under the Baltic Sea bypassing Ukraine.

A contract on gas transit between Russia and Ukraine expires in 2019 and has not been renewed. According to Miller, when Nord Stream-2 is ready, deliveries through Ukraine will be reduced, but will not stop completely.

"We are ready for talks... However, we can only talk about much smaller volumes, possibly around 15 bcm a year for countries which border Ukraine," he said.

Ukraine has the capacity to deliver 120 bcm of Russian gas, but the volume has significantly fallen to 50-80 bcm as Gazprom builds new pipelines. At 15 bcm, it will be a fraction of what Ukraine previously transported.

"If you look from space, you can draw a direct line via the Baltic between new centers of production and Germany's Greifswald. This route is 2,000 km (1,250 miles) shorter than the route via Ukraine," Miller said.

While Gazprom’s share in Europe has grown to one-third over the last two decades, Miller rejects the argument the EU is overly dependent on Russian gas.

"I don't think it is fair to talk about dependence. Our dependence is mutual: when we invest in developing fields and building pipelines, Gazprom relies on future demand and de facto depends on the European market as much as Europe depends on Russian gas," said the Gazprom CEO.