Putin signals wider gas exports


Putin signals wider gas exports


NOVO-OGARYOVO -- Russian President Vladimir Putin gave the clearest indication yet Wednesday that he's willing to put an end to Gazprom's monopoly on natural-gas exports by allowing rival companies to ship liquefied natural gas abroad.

The move is being considered because Russia, despite having the world's largest gas reserves, continues to lag behind other exporters in tapping the high-value LNG export market.

Russia only accounts for 3.6% of the global LNG market, Mr. Putin said at a meeting of top government and energy-firm officials at his residence on the outskirts of Moscow. "If we don't carry out active policies, we risk completely surrendering this market to competitors," he said.

"For the development of this [LNG] sector, all conditions must be created, including the need to consider the possible step-by-step liberalization of the export of LNG," Mr. Putin said.

Ending Gazprom's monopoly on exports would be a blow to the state-controlled company, which is already under pressure from increasing competition from domestic rivals in the Russian market and from companies like Norway's Statoil in Europe.

Gazprom warned last week of a drop in profits for 2012 because of shrinking sales in Europe, where it sells the bulk of its gas exports through a large pipeline network.

Russia's budget lost tens of billions of rubles of revenue last year because of shrinking demand for gas exports, Mr. Putin said.

Other Russian producers such as Novatek and Rosneft are increasing their natural gas output, but have so far been limited to selling it on Russia's domestic market, where prices are much lower than for exports.

Gazprom operates Russia's only LNG plant, on the Pacific island of Sakhalin, in a joint venture with Royal Dutch Shell and Mitsui.

Novatek, Russia's second-largest natural gas producer, last year requested rights to export LNG from a project in the Yamal region of Siberia in 2016, in a joint venture with France's Total.

Mr. Putin has ordered a recasting of Russia's gas strategy in order to focus on LNG and deliveries to Asia. Neither Mr. Putin nor other officials have suggested breaking Gazprom's monopoly on its main method of exporting via pipelines.

Gazprom declined to comment on Mr. Putin's statements. The company has in the past strongly opposed other firms being granted export rights, saying Russian gas companies should not compete abroad.

Igor Sechin, chief executive of Russian oil giant Rosneft and a political ally of Mr. Putin, threw his weight behind calls to allow firms other than Gazprom to export LNG, telling officials at the meeting Wednesday that they should liberalize LNG exports from Russia.

Mr. Sechin said Rosneft had huge natural gas reserves--alongside oil--on licenses it holds on the Arctic shelf.

He said allowing LNG exports would not harm Gazprom as they would be delivered to new customers in the Asia-Pacific region by oceangoing tankers.

Dow Jones Newswires

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