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ASPO International announces Norway is squeezing Russia out of European gas market

Monday, Jan 21, 2013

A Russian newspaper, Kommersant, is published in Russian but also has a daily English version published online. On January 17 it published an interesting article on Norwegian and Russian deliveries of natural gas to the EU, “Norway is squeezing Russia out of European gas market“. The success with shale gas in the USA has meant that gas prices there have decoupled from the price of oil and are much lower than in the EU. One reason for the higher price of gas in the EU is that the Russian delivery contract for gas to the EU is coupled to the oil price. Norway can now offer a lower price and this, together with the economic crisis in the EU has meant that Russian deliveries of gas have decreased. Another factor is that the liquefied natural gas from Snövit, that was originally intended to the shipped to the USA, must now find another buyer and the capacity to receive liquefied natural gas in Europe has increased. An additional factor may be that development of new natural gas fields in Russia is delayed which means that the gas available for export from Russia is declining. Here is the article in Kommersant:

Norway is squeezing Russia out of European gas market

Published: 17 January, 2013, 13:40

Norway, Russia’s closest rival in the European gas market, seems to overtaking Russia’s Gazprom. Norway boasted record high exports in 2012, while Gazprom suffered the worst numbers in 10 years.

Norway increased its exports 16% in 2012 to reach 107.6bn cubic metres, according to Europe’s key statistics office Eurostat. This is “a record level, close to the Russian gas exports to Europe,” Michael Korchyomkin, head of East European Gas Analysis, told Kommersant daily.

During the same period, Russia’s gas giant Gazprom cut sales to Europe and Turkey by 8%, according to the company’s head Aleksey Miller. That’s the lowest export level for the last decade, Korchyomkin said.

At the moment Norway is breathing down Russia’s neck in its key European market – Germany. In 2011 Gazprom supplied 30bln cubic meters out of the total 80bn cubic meters of gas Germany consumes annually. Norway sold just a bit less – 28bn cubic meters. Norway’s Statoil accounts for about 70% of the country’s exports and in 2012 signed a 10 year contract to supply gas to Germany’s Wintershall.

Norway’s lower gas prices are another tool to win customers. The country’s Petroleum Ministry is suggesting charges for gas transportation in new contracts should be significantly cut, according to Reuters citing Norwegian Petroleum Minister Ola Borten Moe.The exact price cut remains unclear, with Kommersant daily assessing it at 7%.

Competitive pricing has become a crucial issue at a time when crisis – stricken Europe can’t afford huge bills.

On Thursday Gazprom 9M 2012 IFRS results showed things are not that rosy for Russia’s’ gas monopoly. The company’s profit for the period was down 12% year on year to $27.1bn, with the net sales of gas decreasing by 8% year on year, to about $61.4bn.

Net sales exclude the amounts paid by the company in form of value added tax and customs duties.

Source: ASPO International

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