The leaders of the two largest independent gas producers Rosneft and NOVATEK — again joined efforts in the fight against Russia’s largest gas producer Gazprom. CEO of Rosneft Igor Sechin and Chairman of the Board and co-owner of “NOVATEK” Leonid Mikhelson sent a joint letter to Prime Minister Dmitry Medvedev and asked to suspend the preparation of the experiment on selling gas at market, unregulated prices, which should start in 2017.
“Work through the argument [argument] independent gas producers. Report on proposals for the alignment target of the activities of gas market participants”, — Medvedev wrote in this letter, referring to the first Deputy Prime Minister Igor Shuvalov and head of Federal Antimonopoly service Igor Artemyev. RBC has a copy of this letter, its authenticity was confirmed by the employees of “Rosneft” and “NOVATEK” and “Gazprom”, as well as the Deputy head of the control Tek FAS Natalia Pronin.
According to Pronina, received the order of Medvedev, FAS will propose to the alignment of the activities of gas producers before the end of this week. Further comment she refused. The representative of the Secretariat Shuvalov did not respond to a request.
Sechin and Michelson, who have long sought the cancellation of export monopoly “Gazprom” has complained to Medvedev that is still not executed orders from the presidential Commission on Teku which was held on 27 October 2015 and at which it was decided to create equal economic conditions for all participants of the gas market in Russia and establishing of a single economically reasonable tariff for transportation of gas. For example, still has not provided non-discriminatory access to pipelines and underground storage, “Gazprom”, indicate top managers. Besides, despite comments from independent gas producers, it seems the old method of tariff calculation for gas transportation and wholesale gas prices are not indexed in accordance with the parameters of socio-economic development, approved by the government, the letter said.
However, the FAS proposed in 2017 to conduct a pilot project for deregulation of gas prices (now, domestic prices for gas “Gazprom”, in contrast to independent producers that are regulated by the government) in three regions — Tyumen region, Yamalo-Nenets and Khanty-Mansi Autonomous districts. This experiment assumes that “Gazprom” will sell gas in three regions at a price below that which sets for it FAS. “To create equal economic conditions for all gas market participants in the experiment will have negative consequences for the industry,” Sechin warned and Michelson.
Deputy head of FAS Anatoly Golomolzin at the end of the meeting on 22 September stated that the government of the Khanty-Mansiysk Autonomous district and Tyumen region, Gazprom, independent producers and gas consumers has supported the implementation in 2017 of the pilot project on the liberalization of gas prices. “As a market price indicator, the project will use the stock quotes, OTC price indices and indices of comparable foreign markets. It is assumed that since the first quarter of 2017, the parameters of the monthly volume of natural gas sales on the stock exchange will be not less than 3 billion cubic meters, will be respected the principle of regularity and uniformity,” said he then.
But in the case of the implementation of this experiment amplified the disparity between market participants, because it removed the restrictions with Gazprom on selling its gas on the domestic market at regulated prices, and for independent gas producers, the restrictions imposed on access to infrastructure and consumers, the authors of the letter. Besides, the conditions for “redistribution” in the wholesale gas market, crowding out independent players and “discrimination of consumers by the monopolist”. In the end, all this will lead to “the destruction of the unity of the economic space at the expense of price deregulation in certain regions”.
As competitors of Gazprom do not have the right to sell gas for export, due to the strengthening of the monopoly positions they will be forced to reduce production, which ultimately “will return the situation to the monopolization of the industry and the shortage of gas,” Sechin fear and Michelson. However, a source in NOVATEK doubt that the laws governing the experiment, the FAS for the abolition of regulated prices on gas, up to the end of 2016 approve the Ministry of justice and other relevant agencies. Typically, a controversial initiative for a long time are agreed, he says, so the threat of gas deficit in the three Northern regions are a little exaggerated — it is unlikely to be implemented.
The authors of the letter remind that “Gazprom” can already compete with independent gas producers, selling “free” prices of more than 42 billion cubic meters annually — by gas, which produces and sells his “daughter” of “Gazprom Neft”, as well as raw materials that the monopoly buys other players. In addition, “Gazprom” can sell on the exchange another 17.5 billion cubic meters of gas at the St. Petersburg stock exchange.
In order to prevent the monopolization of the gas market, the head of “Rosneft” and “NOVATEK” asked Medvedev to instruct the FAS to stop the experiment and to align working conditions for all producers. We are talking about establishment of unified approaches to implementation of gas to existing markets, the introduction of a “fair” economically reasonable tariff for transportation of gas through pipelines (not higher than “daughters” “Gazprom”), as well as consideration of the possibility of reduction of prices on transportation of gas over long distances, the letter said.
“Gazprom” is interested in realization of the experiment, the FAS for the sale of gas at market prices, said a source in monopoly: this would give the company an opportunity to level the playing field with its competitors and align its position in the gas market, at least in these three regions. To run these pilots have prepared memoranda, but still need to work out normative-legal base, warns a source in the FAS. And in order to equalize working conditions for all gas producers, need to adopt the Rules of non-discriminatory access to gas-transport system “Gazprom”, which has already developed anti-monopoly service, he said. But the government has repeatedly returned the document for revision, recalls the interlocutor of RBC.
Medvedev’s press Secretary Natalya Timakova declined to comment on the letter competitors “Gazprom”. Also admitted to the press service of “Rosneft”, “NOVATEK” and itself “Gazprom”.
“Independent producers have more favourable conditions for sale of gas to domestic consumers, which leads to a gradual displacement of gas companies from the regions and increase the share of independent manufacturers in the Russian market”, — the report said “Gazprom” for the third quarter of 2016 to the company. Indeed, “NOVATEK” and “Rosneft” — the main competitors of Gazprom in the domestic gas market. For the first nine months of 2016, “Gazprom” has sold in Russia 156,9 billion cubic meters of gas, “Rosneft” and “NOVATEK” — 49,33 billion and 46.3 billion cubic meters, respectively. Moreover, since September, gas production “Rosneft” (not just selling raw materials) exceeded production, “NOVATEK”, which is still considered the second gas producer in the country after Gazprom, boasted 11 November, Vice-President “Rosneft” Pavel Fedorov, presenting financial and operational results for the third quarter of 2016.
In the Tyumen oblast, YANAO and KHMAO, which is planned to experiment on the introduction of free prices for gas “Gazprom” has fallen almost a quarter of the sales of NOVATEK in Russia in 2015 and 14.9 billion cubic meters of gas and 15% of sales, “Rosneft” — 9 billion cubic meters (15%), wrote “Kommersant”. Thus, it is a key region for competitors of the monopoly.
For “Gazprom” the experiment of the FAS on the liberalization of the domestic gas market — this is a great chance to turn the situation and the ability to offer the most loyal and solvent industrial consumers, so the company will do its utmost to fight for its rapid implementation, said the analyst “Aton” Alexander Kornilov. But independent gas producers due to the large administrative resources (Rosneft and NOVATEK) have the opportunity to try to suspend the carrying out of this experiment, he suggests. However, in addition to the liberalization of exports of liquefied natural gas (LNG) competitors of Gazprom and failed to achieve equal monopoly pricing in the transportation and storage of gas.
In addition to the ousting of Gazprom on the domestic market to independent gas producers are actively seeking the abolition of its monopoly on exports of pipeline gas. In March 2016, it became known that Michelson and Sechin at the end of last year, asked President Vladimir Putin, told RBC sources. And in October of Michelson for the first time publicly about this, noting that the state will benefit from this. “I believe that the state would make more sense to have an alternative to Gazprom in pipeline exports,” he said in an interview to “Kommersant”.
According to the head of NOVATEK, Gazprom was “very good period” for the last 15 years, when the price of oil was high (many long-term contracts “Gazprom” have the oil linkage). “And formed the view that it is possible to work only and no more, and this leads to the impossibility to take into account emerging risks”, — he said. “But there is still the problem of the attitude to Russian gas on the European market is now “Gazprom” in fact,” — said Mikhelson. “Is there some kind of “problem of the relation to Russian gas”, showing figures of exports of “Gazprom”, for example last week, 590 million cubic meters a day — an absolute record,” retorted the representative of the then Chairman of the Board of “Gazprom” Sergei Kupriyanov, answering the question of RBC. On November 11, the monopoly has set a new record, putting exports 597,9 million cubic meters of gas.
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