On 7 October Gazprom CEO Alexey Miller made a remarkable speech at the IV St. Petersburg International Gas Forum on the global gas industry.
We reproduce the main points from his speech. They include some highly significant and contrary statements, which we have highlighted for you.
Alexey Miller, Gazprom CEO:
- We believe that by the year 2050 natural gas will represent one third of the global energy mix and that the production volumes will exceed 7 trillion cubic meters per year.
- The share of LNG in the global trade, both in the medium and in the long term, will not change, but will stay at a level of 30%.
- The North American gas market will be solving its own problems during the next 10-20 years and shale gas will remain a regional market development – not a global one.
- The Asian-Pacific market is the most dynamic, fastest growing and also the most promising market. The share of gas transported through pipelines on the Asian-Pacific market and the Chinese market will grow steadily.
- Gazprom has entered the Asian-Pacific market this year with a very lucrative contract worth $ 400 billion over 30 years. But this is only the beginning, and the prospects for pipeline gas supplies to the Chinese market are simply enormous. Our shipments may grow in the short term up to 60 and even up to 100 billion cubic meters of gas per year.
- Looking at the cost structure in European industry we see that energy consumption in the production sector of European companies has increased. And most importantly, because of that, the competitiveness in the European production sector has decreased.
- Europe has built a large number of LNG terminals to diversify its supply base but they are only used at 20% capacity. The reason is that the European market has lost the battle with the Asia-Pacific LNG market when it comes to prices for LNG.
- There could be new approaches towards gas pricing. Such new approaches could replace spot markets and hubs on the European gas market that simply do not have enough liquidity and do not produce the right pricing signals.
- Gazprom is analysing and examining its own strategies which guided the company lately. The company is re-evaluating whether it is worth being everywhere on the value chain in Europe e.g. from production to retail. The European market isn’t a buyer’s market now and Gazprom may be more selective in pursuing projects it already planned because reaching end users in Europe doesn’t necessarily work. This does not mean that Gazprom will abandon some projects, but it does mean that there will be changes.
- This year we will extract 463 billion cubic meters of gas but our annual production rate is 617 bcm which means Gazprom has excess capacity. This is needed so we can react to the demands of the market and also pass this winter calmly.
- The gas market has developed very quickly in all the regions of the world and strategies that guided the companies in those markets have very quickly became obsolete. All the players in the gas markets in North America, the Asia-Pacific and the EU face the challenge to design new strategies and have new approaches.
- The 20th century was the century of oil. The 21st century is the century of gas.
The Russian version of the speech is available here.