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The Globalization of Russian Gas

Political and Commercial Catalysts

James Henderson and Arild Moe

Since the collapse of the Soviet Union, Gazprom has dominated the Russian gas industry. However, the markets in which it operates have changed dramatically, with the company increasingly being challenged at home and abroad. At this critical moment, this insightful book analyses the involvement of the Russian gas industry in the changing international gas market and the dramatic implications for Russia’s role as a global supplier of gas in the future.
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Index

James Henderson and Arild Moe

ABC1 reserves 14
Algeria 678
Alltech Group 143
Altai region 107, 108, 113, 117, 123, 125
see also Power of Siberia and PoS 2
arbitration 61, 64, 78, 978
Arctic LNG-2 project 76, 121, 123, 124, 125, 140141, 145, 146, 147, 151
Arctic LNG-3 project 141
Asian market 1, 5, 66, 67, 71, 72, 73, 101, 102, 1034, 122, 151, 152
impact on Europe 125
see also Central Asia; China; India; Japan
Australia 66, 73, 136, 144, 156
Azerbaijan 70, 84
Baltic LNG 1289, 1334
Barsukova, Svetlana Yu 28
BASF 83, 91
Beijing 106, 115, 117, 124
Beijing Gas 123, 125
Bekri, Nur 113
Belarus 94
Blue Stream pipeline 88, 94, 95
Bovanenkovskoye field 11, 12, 61
Bulgaria 84, 86, 87, 89, 157
carbon price 65, 66
Central Asia 9, 106, 112, 114, 117, 11820, 152
Centre for Strategic Research 17
Chayandinskoye field 104
Chelyabinsk region 19
China 5, 16, 1235
economics of gas exports to 11217
environmental policy 66, 72
gas demand 67, 1036, 10812
negotiations 5, 102, 1068, 113
politics of gas exports 11821
relations with Russian companies 14, 15, 1223, 133, 138, 146, 151
relations with US 102, 11213, 11819, 121, 124
Chinese National Energy Administration 113
CNOCD (China National Oil and Gas Exploration) 141
CNOOC (China National Offshore Oil Corporation) 141
CNPC (China National Petroleum Corporation) 107, 11112, 120, 121, 122, 123, 124, 132, 138, 139, 151
coal
pricing 8, 33, 34
switching to gas 58, 59, 646, 69, 72, 106, 112, 118, 156, 158
Commission for Strategic Development of the Fuel and Energy Sector and Environmental Security 16
competition 1534
in Asia 108, 114, 115, 116, 117, 122
domestic market 11, 15, 1920, 25, 3536, 38, 47, 100, 137
and economic stagnation 356
export markets 18, 24, 68, 71, 72
impact of EU policies (TEP) 60, 623, 82
between LNG and pipeline gas 667, 68, 146
between Russian suppliers 137, 142, 144, 147
with US LNG 724
Competition Authority (EU) 63
compressor stations (CS) 40
Corruption 278
Croatia 78
Czech Republic 83
Dagestan 22
decarbonization 2, 103, 150, 158, 159
Denmark 91, 157
destination clauses 63, 146
DEPA (Public Gas Corporation of Greece) 88
derivative products 39, 40, 4950
DG COMP 63, 77, 155
Directive 2009/73/EC 912
distribution 78, 25
and economic efficiency 314
and gasification 234
rent 2, 8, 267, 29
theft of resources 223
diversification
Chinese imports 112, 118
EU strategy 57, 77, 78, 8384, 86, 93, 94, 107, 155, 156
towards Asian-Pacific market 100, 102, 103, 106, 122, 138, 151, 152
domestic economy 79
competition 11, 15, 1920, 25, 356, 38, 47, 100, 137
and efficiency 334
gasification 234
independent producers 912
pipeline maintenance 2021, 25
political influence 1516
and reforms 1618, 24, 25, 2630
resources 1215
stagnation 356
subsidization of consumers 213, 25
Dvorkovich, Arkady 39
Eastern Economic Summit 112
Eastern Gas Program 103, 104, 107
East Siberia 14, 1025, 107, 108, 123, 132, 1512
EDISON 61, 88
EEZ (Exclusive Economic Zone) 91, 92
El-Katiri, Laura 32
Energy Superpower 2
ENGIE 91, 140
ENI 84
environment 65, 66, 72, 106
E.ON Ruhrgas 61, 83, 91
Equinor 127
ESPO (East Siberia Pacific Ocean) pipeline 123, 151, 152
ETK (Evropeyskaya Treydingovaya Kompaniya) 43
ETP (Electronic Trading Platform) 3739
EUGAL pipeline 92, 93
EU Legal Service 912
EuroChem 43
European Commission 52, 62, 63, 64, 76, 77, 79, 83, 85, 89, 912, 98, 103, 157, 158
Gas Directive 82, 912
European Council, 77, 92
European market 57
coal-to-gas switching 656
future trends 6971
impact of US shale revolution 5960
liberalization policy 60, 77, 1556
netback pricing 58
policy measures, TEP 812
European Parliament 93, 157
European Union 57
diversification of supply sources 57, 77, 78, 834, 86, 93, 94, 107, 155, 156
imports from US 94
and the Nord Stream projects 83, 8993, 157
relations with Russia 82, 856, 99101
support to Ukraine 98, 99
TEP 5, 52, 57, 60, 62, 789, 8182, 85, 8889, 99, 155, 157
exports 1, 57
liberalization 1618, 24, 25
market competition 18, 24, 68, 71, 72
needed capacity 946
and politics 23
ExxonMobil 123, 142, 143
Far East LNG 104, 112, 113, 117, 118, 123, 124, 129, 137, 1423
FAS (Federal Anti-Monopoly Service) 10, 19, 34, 39, 41, 42, 45, 154
FID (Final Investment Decision) 75
FRSU (floating regasification and storage unit) 78
Gaddy, Clifford 2
GAIL 122
Galkynysh field 119
gas exchange see trading
gasification 17, 18, 19, 234, 25, 26
Gas Natural Fenosa 139, 140
Gas-Oil Trading 43
Gasunie 83
Gazprom 1, 2, 89, 10, 52, 103, 1523
Electronic Trading Platform 37, 53
and European policies 57, 58, 6064, 6971, 7679, 82, 91, 155
future strategies 100101
and gasification 234
joint venture with Novatek 1367
and liberalization 11, 16, 18, 37, 154
and LNG competition 66, 689, 716, 1545, 159
LNG projects 12636, 152
Mezhregiongaz 23, 367, 42, 54
Mezhregiongaz Delivery 40
Neft 12, 151
non-payment issues 22, 36
and pipeline access 489
pipeline maintenance 2021
political connections 15
and pricing competition 1011, 2021
relations with China 107, 108, 113, 114, 118, 120, 123, 133
relations with India 122, 139
relations with Ukraine 8081, 856, 967
and rent distribution 267, 29
reserves 1213, 104
Shtokman project 1278
South Stream project 848
trading on SPIMEX 412, 44
GDF Suez 83
Germany 64, 69, 85, 114
Nord Stream project 83, 91, 92, 93, 94, 97
Greifswald 83, 92, 94
Groningen field 66, 70
Gydan Peninsula 120, 123, 140, 141, 151
Han Zheng 113
Hedlund, Stefan 2
Henderson, James 3
Henry Hub price 5960, 61, 63, 64, 71, 73, 75, 117
Hill, Fiona 2
Högselius, Per 2
Hungary 89, 94, 157
Ickes, Barry W. 2
IEA 70, 106, 150
IED (Industrial Emissions Directive) 65, 69
IGAs (inter-governmental agreements) 85
India 67, 72, 103, 122, 139, 143
interconnectors 81, 89, 100
Iran 71
Iraq 71
Irkutsk centre 104
Itera 9, 10, 26
Japan 72, 103, 122, 130, 132, 133, 141, 143
JCC (Japanese Customs Cleared) price 107
Kaliningrad region 133
Kamchatka Peninsula 104, 121, 146
Karachaevo-Cherkessia 23
Kazakhstan 9, 119
Kirinskoye field 104, 131
Kogas 141
Korea 72, 103, 122, 123, 130, 138, 141, 147, 148
Kostroma region 19
Kovyktinskoye field 104, 107
Kozak, Dmitry 113
Krasnoyarsk centre 104
Kryukov, Valeriy 2
Kudrin, Aleksey 17
Law on Gas Supplies 24
liberalization 2, 8, 1618, 245, 30, 100, 102, 137, 159
EU policy 60, 76, 77, 82, 156
Gazprom approach 11, 16, 18, 37, 154
and SPIMEX exchange 445, 53, 55
Lithuania 63, 78, 133
LNG market 1, 56, 16, 24, 103, 1489
Chinese imports 10225
future concerns 1448
Gazprom projects 122, 12636
and globalization 150159
Novatek projects 1314, 756, 120121, 123 13641, 1445, 147, 151, 152, 159
other Asian markets 122
Rosneft projects 1223, 137, 1424, 147, 150, 152
strategy 6, 756, 126, 1336
supply, impact of 669, 712, 78
US 736, 78, 934, 119
Loe, Julia S.P. 2
Lokosovo CS 39
Lukoil 11, 43
Macedonia 88
Malacca Straits 118
Medvedev, Dmitry 23, 39
Merkel, Angela 97
Middle East 32, 80, 118
Mikhelson, Leonid 4, 15, 16, 147, 148, 150
Miller, Alexey 4, 15, 82, 87, 934, 97, 109, 11112, 113, 120
Ministry of Economic Development 47
Ministry of Energy 11, 38, 39, 47, 137
Ministry of Natural Resources 129
Mitrova, Tatiana 103
Mitsubishi 129
Mitsui 129, 133
Moe, Arild 2
Mosenex (Moscow Energy Exchange) 42
Murmansk 128
Myanmar 106, 117, 118, 152
Nabucco project 84
Nadym CS 40
Nadym-Pur-Taz region 12
Naftogaz 95, 96, 97
Nenets Autonomous District 12, 143
Netherlands 64
Groningen field 66, 70
non-payments 22, 36
Nord Stream AG 83
Nord Stream pipeline 31, 45, 55, 823, 86, 87, 94, 95, 99, 117, 128, 1578
Nord Stream 2 AG 91
Nord Stream 2 project 52, 8993, 95, 97, 99, 103
North Africa 32, 71
North Caucasus Federal District 22
Northern Sea Route 121, 124, 138, 145, 147
Norway 66
contract with Lithuania 78
production trends 70
Novak, Alexander 52, 97
Novatek 4, 7, 10, 19, 103, 150
liberalization campaign 16
LNG projects 56, 15, 24, 756, 103, 120122, 124, 13641, 1445, 146, 147, 151, 159
market competition 1011, 35, 434, 153, 154
political connections 15, 289
production and reserves 1314
relations with Asia 122, 123, 124, 151
nuclear plants 69
Ob LNG project 141
offshore pipelines 912, 157
and EU policies 912, 157
and Turkstream 87
oil price 14, 345, 38, 745, 107, 108, 109, 115, 116, 124, 125, 143
linked gas pricing 5864, 76, 155
OMV 91
ONGC (Oil and Natural Gas Corporation Limited) 143
OPAL pipeline 83, 87, 91, 92, 157
‘Orange Revolution’ 81
OTC (over-the-counter) market 40
Pakistan 67, 103
Parabel CS 40
Pechora LNG 1434, 146
Perry, Rick 93
Petro-Canada 128, 129
Piltun-Astokhskoye field 129
pipeline, expansion 20
and Chinese gas demand 10912
and maintenance 2021
needed capacity 946
Pirani, Simon 3
Poland 73, 78, 83, 85, 91, 94, 96, 99, 157
‘Polar Silk Road’ (or ‘Silk Road on Ice’) 120
Poseidon pipeline 88
Power of Siberia 5, 16, 102, 108, 109, 111, 113, 123, 125, 142, 146, 152
PoS 1 11415, 117, 118
PoS 2 109, 11316, 117, 118, 125
PoS 3 113
Presidential Energy Commission 15, 40, 142
pricing 8, 910, 34, 35, 38, 51, 52, 58, 11415, 117, 124
distribution and economic efficiency 324
domestic competition 1011, 1920, 356, 154
ETP strategy 378
Gazprom adjustment strategy 6064
hub-based 5960, 61, 63, 64, 71, 73, 75, 117
and negotiations with China 1078, 11417, 124
oil-linked 5864, 76, 155
SPIMEX 5052
stagnation 356
subsidization of consumers 213
Prigorodnoye 129, 130
Production sharing agreement (PSA) 129
Putin, Vladimir 2, 5, 16, 19, 22, 137, 140, 154
criticism of TEP 82
on gas exports 24
and pricing strategy 34, 38, 44, 51, 61
and relations with China 1078, 112, 118
relations with company leaders 15, 150
and the Ukraine dispute 85, 96, 99
Qatar 72, 145, 155
reforms
liberalization of exports 1618, 25
political obstacles to 2630
renewable energy 57, 59, 64, 65, 69, 156
rent distribution 2, 8, 267, 29
reserves 11
East Siberian 1036
Gazprom 1213
Lukoil 11
Novatek 1314
offshore 12
Rosneft 14
Romania 87, 94
Rosneft 4, 7, 10, 15, 52, 103, 104, 130, 151, 159
liberalization campaign 16
LNG projects 130, 137, 1424, 147, 152
and market competition 11, 35, 40, 153, 154
political connections 15, 28, 2930, 150
production and reserves 14
relations with China 5, 1223, 125, 152
supply 19
trading on SPIMEX 434, 47
RusGazDobycha 134
Russia’s Energy Strategy 17, 20, 127
Sabine Pass formula 117
Sakhalin Island 104, 113, 123, 127, 142, 152
Sakhalin-1 project 14, 16, 104, 123, 130, 1423
Sakhalin-2 project 102, 104, 122, 123, 12933, 134, 136, 142, 143, 150
Sakhalin-3 project 104, 130132
sanctions 86, 147
EU 35, 85, 102, 107, 124, 144, 156, 157
US 35, 80, 93, 102, 107, 120, 124, 131, 132, 138, 143, 144
Saudi Aramco 141
Sberbank 27, 76, 104
Sechin, Igor 4, 15, 16, 40, 52, 122, 142, 150
security of supply 5, 32, 57, 76, 81, 83, 101, 103, 132, 155, 158, 159
Šefčovič, Maroš 89
Sempra 141
Shah-Deniz project 7071, 84
shale gas 1, 59, 60, 65, 93, 109, 128
Shell 91, 148, 150
partnership with Gazprom 129, 1312, 134
Shtokman Development AG (SDAG) 1279, 134
Silk Road Fund 120121, 138
Slovakia 85, 94, 96
SODECO (Sakhalin Oil & Gas Development Co.) 143
South Kirinskoye field see Yuzhno Kirinskoye field
South Korea see Korea
South Stream project 845, 99
cancellation 867, 157
South Tambey field 136, 137
SPIMEX (St Petersburg International Mercantile Exchange) 31, 535, 154, 158
creation 3940
development 4450
and Russian price regulation 5053
support and opposition to 414, 53
spot prices 52, 60, 62, 64, 73, 74, 75, 77, 117
Statoil see Equinor
Stern, Jonathan 70
subsidies to consumers 8, 19, 213, 25
Sverdlovsk region 9, 19
Taiwan 72, 103
TANAP (Trans-Anatolian Natural Gas Pipeline) 71
TAP (Trans Adriatic Pipeline) 71, 84, 88
tariffs 8, 16, 34, 48, 49, 55, 92, 107, 117, 154
TEP (Third Energy Package) 5, 52, 57, 60, 62, 77, 789, 812, 85, 8889, 91, 98, 99, 155, 157, 158
Timchenko, Gennady 15, 136, 150
TNK-BP 10, 107
Total 24, 121, 127, 138, 141
trading
and derivative products 4950
ETP strategy 378
increasing volumes 467
index measures 456
oil-linked 5864, 76, 155
regional subsidiaries 3637
transparency of transport system 489
see also LNG market; SPIMEX
Transneft 151
transportation 8, 38, 39, 40, 103, 155
costs 20, 33, 34, 489, 73, 109, 11415, 117, 121
and future LNG business concerns 1478
and TEP 79
Trump, Donald 73, 113
TTF (Title Transfer Facility) 45, 49, 117, 154
vs. Russian gas price to Europe 64
vs. SPIMEX 46
Turkmenistan 9, 106, 112, 114, 119, 120, 124
TurkStream pipeline 879, 95, 97, 99, 157
Tusk, Donald 77
UGSS (United Gas Supply System) 11, 12, 38, 48, 49, 117
Ukraine 35, 58, 77, 83, 87, 88, 89, 92, 93, 94, 103, 107, 124
conflict with Russia 5, 57, 81, 85, 107, 155
gas dispute with Russia 8081, 978, 155
UkrTransGaz 98
United Kingdom 60, 69
coal-to-gas switching 65, 66
production trends 70
United States 1, 28, 140
impact of shale gas on EU market 5960, 65
LNG 736, 934, 117, 136
and the Nord Stream 2 project 93
relations with China 102, 11213, 11819, 121, 124
sanctions 35, 80, 93, 102, 107, 120, 124, 131, 132, 138, 143, 144
support to Ukraine 98
Urengoy 113
Utrenneye field 141
Uzbekistan 9, 119
Uzhgorod 94
Vladivostok 104, 107, 112, 118 147
Vladivostok LNG 1323, 152
Vostok 2018 112
Vyborg 83, 89, 94
Vyngapurovskaya CS 40
Wintershall 83, 91
World Energy Outlook 70, 150
WTO 34, 155
Xi Jinping 111, 112
Xinjiang province 107, 114, 115
Yakutsk centre 104
Yamal-Europe pipeline 94, 95
Yamal LNG project 16, 24, 7576, 120, 123, 124, 125, 133, 13641, 145, 14647, 151
Yamal-Nenets Autonomous District 12
Yamal Peninsula 10, 11, 12, 16, 35, 61, 75, 100, 113, 120, 128, 153
Yangpur 43
Yuzhno-Balykskaya CS 40
Yuzhno Kirinskoye field 104, 117, 124, 131
Zvezda shipyard 1478