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The New York Times: Executive lays out Gazprom’s vision for Asia-Pacific region

By Andrew E. Kramer

Published: September 20, 2006
MOSCOW A top executive of Gazprom, the Russian natural gas monopoly, expounded Wednesday in a speech at an economic forum on his company’s sweeping plan for controlling supplies in the Asia-Pacific region – one some analysts say would replicate in Asia a strategy that served the company well in Europe.
Gazprom’s deputy director, Aleksandr Ananenkov, spoke just two days after the Russian government withdrew an environmental permit for a consortium led by Royal Dutch Shell on Sakhalin Island.
That action threw the future of the venture as a foreign-controlled development into doubt. Gazprom is negotiating to join the consortium; energy analysts say the environmental ruling appeared to be a nudge by the Russian government to force Shell to sell a stake to the Russian company, or risk expensive delays.
Also, in another setback for Shell, the European Bank for Reconstruction and Development said Wednesday that it would withhold a $200 million loan from the consortium if the Russian government formally revoked the environmental permit. This could delay other, linked commercial bank financing and raise overall capital costs for the $20 billion development.

The action in Sakhalin came as Gazprom was maneuvering to control another natural gas field in Siberia now owned by BP’s joint venture in Russia: TNK-BP’s Kovytka field in the Irkutsk region.
Gazprom has detailed plans to link Sakhalin by pipeline with natural gas fields in eastern Siberia, and ultimately western Russia, into a unified system that will supply both domestic users and customers in Asia, Ananenkov said.
“Already today, Gazprom possesses more reserves of natural gas than all countries of the Asia-Pacific region combined,” he said, according to excerpts provided by Gazprom. “This creates a solid base for relations between our company and any government in this region.”
The company has a timeline for natural gas pipe laying in Siberian provinces from the Altai Mountains to Vladivostok, he said. Ananenkov said mostly untapped natural gas deposits in Sakhalin, Irkutsk, Krasnoyarsk and Yakutia would power this integrated domestic- and export-oriented system.
It is a vision of monopolistic supply, according to Rory MacKarquhar, director of Goldman Sachs in Moscow.
“The simplest, and least damning, explanation is the same reason they insist on this in Europe,” he said, referring to Russia’s stated economic goals for maintaining a monopoly on natural gas. “They see no advantage to Russia competing with itself in gas supply. They are in a much stronger bargaining position when they have a united front. This holds true in the east as well as the west.”
The problem is, Gazprom does not own the field licenses to supply enough natural gas to meet its vision of a monopoly in the east, according to analysts; those licenses now belong to foreign companies that entered Russia in the 1990s. For most of the 1990s, Gazprom ignored the Asian market, focusing on traditional customers in Europe. Fields in the east were snapped up by foreign companies, such as BP or Shell, eager for a toehold in northeast Asia. It was the most liberal and diversified region in Russian energy development.
Now, Shell is the only company in Russia marketing natural gas for export outside of Gazexport, Gazprom’s export arm, and is an exception that potentially could undermine Gazprom’s future pricing power in Asia.
“For many years, Gazprom has been trying to push its entry into Kovytka and Sakhalin projects,” said Vitaly Yermakov, research director for Russian and Caspian energy in Cambridge Energy Research Associates.
“Russia needs to have the opportunity to apply price pressure on its counterparts, both in the west and the east,” he said. “That is the whole point of the export monopoly.” and its sister non-profit websites,,,,,, and are owned by John Donovan. There is also a Wikipedia feature.

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