Is Gazprom Trying Turkmenistan Shuffle on Exxon?
Gazprom is pushing Exxon to sell the natural gas from its huge Sakhalin-I field not to China, as the American oil giant prefers, but to the domestic Russian market. It's easy to get suspicious and see the drift of Gazprom's successful Turkmenistan strategy to Russia. It goes like this: Buy gas cheaply locally, and sell it at a profit in Europe.
Here is the first paragraph of the Reuters account: Russia's gas export monopoly Gazprom said on Tuesday it needs gas from Exxon Mobil's Sakhalin-1 project for domestic use, mounting pressure on the U.S. major to drop plans to export gas to China. Read story
Steve's comment: My own feeling is that this is precisely what Gazprom has in mind -- get Exxon to sell the natural gas at domestic prices, then effectively sell the same gas to Europe at a huge markup.
Russia has played this game with Turkmenistan since 1992. It claims that the Turkmenistan gas is going only to former Soviet customers who pay subsidized rates, and not to Russia's European customers. So it pays Turkmenistan a discount rate for its natural gas.
But that is a ruse -- all natural gas goes into a single, collective pipeline system passing through Russia. Turkmen gas is indistinguishable from that produced anywhere in Russia. So in effect, Russia is earning export profit from the Turkmen gas, and the Turkmen have been the losers for 15 years.
In Exxon's case, it says that the deals it has in mind with China would pay more. Russia says the domestic market needs the gas, yet at the same time, Gazprom is having more and more trouble meeting its supply commitments to Europe. Where will some of the extra gas come from? Sakhalin-I perhaps?
Here is the first paragraph of the Reuters account: Russia's gas export monopoly Gazprom said on Tuesday it needs gas from Exxon Mobil's Sakhalin-1 project for domestic use, mounting pressure on the U.S. major to drop plans to export gas to China. Read story
Steve's comment: My own feeling is that this is precisely what Gazprom has in mind -- get Exxon to sell the natural gas at domestic prices, then effectively sell the same gas to Europe at a huge markup.
Russia has played this game with Turkmenistan since 1992. It claims that the Turkmenistan gas is going only to former Soviet customers who pay subsidized rates, and not to Russia's European customers. So it pays Turkmenistan a discount rate for its natural gas.
But that is a ruse -- all natural gas goes into a single, collective pipeline system passing through Russia. Turkmen gas is indistinguishable from that produced anywhere in Russia. So in effect, Russia is earning export profit from the Turkmen gas, and the Turkmen have been the losers for 15 years.
In Exxon's case, it says that the deals it has in mind with China would pay more. Russia says the domestic market needs the gas, yet at the same time, Gazprom is having more and more trouble meeting its supply commitments to Europe. Where will some of the extra gas come from? Sakhalin-I perhaps?
Labels: Exxon, natural gas, Russian pipelines, sakhalin
2 Comments:
"It claims that the Turkmenistan gas is going only to former Soviet customers who pay subsidized rates..."
Interesting. In the last 18 months or so Russia was quite busy with declaration it was not going to subsidize others any longer: Ukraine, Azerbaijan, Georgia, even Belarus and , I think, Armenia. Sounds like Turkmenistan has every right to pressure for renegotiating prices.
Victor, this is an important tweak. Russia has shifted its logic, and in fact raised the price it pays Turkmenistan. But it is still not world price, and neither is what Exxon would receive at Sakhalin-I.
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