Cold snap tests Gazprom's reach
Moscow - Gazprom's inability to pump extra gas to Europe during
the big winter chill has cast clouds over the Russian giant's vision of
becoming the world's fail-safe supplier of last resort.
Analysts said the snag's emergence, during one of
Europe's coldest spells on record, points to supply inflexibility on the
part of Gazprom that could spur the European Union's bid to talk down the price of
nearly a third of its total gas imports.
Nations stretching from Germany to Greece reported gas
shortfalls that reached 28.9% in Italy and nearly forced cuts to
some domestic clients.
"European clients of Gazprom have another strong
argument for the price negotiation. The high prices of Russian gas did
not guarantee the security of supply," said East European Gas Analysis
chief Mikhail Korchemkin.
"The cold weather spike in demanded raises questions
about... Europe's apparent expectation that Gazprom can quickly ramp up
exports volumes as a 'swing supplier'," added IHS regional energy
analyst Andrew Neff.
There has been some dispute about whether Gazprom
actually reduced its exports to supply shivering Russian clients, or simply failed to meet the extra demand put forward by European
Both sides agree that no contractual obligations were
broken and that Europe was largely able to meet the extra demand by
digging into its own natural gas reserves.
But analysts said Gazprom's problems stem from a risky
strategy that focused on building up the state monopoly's pipeline
network instead of ensuring it had enough European storage facilities
for tapping in times of peak demand.
That lapse appears to have been only compounded by a
sharp cut in Gazprom's imports from Turkmenistan - long used to
supplement European sales - ahead of this year's commissioning of its
first mega-field on the Yamal Peninsula.
"Turkmenistan and storage gas could have contributed
some 240 million cubic metres per day - enough to provide a stable gas
flow to Europe," said Korchemkin.
The firm's export chief Alexander Medvedev has conceded
that Gazprom now lacks the gas storage space in Europe needed to cover
unexpected demand spikes in the years to come.
"We cannot promise that this will not happen again next
winter or over the next five years," Medvedev told Russia Today
"That is why we have given the green light to a programme aimed at doubling the volume of our European storage facilities."
Gazprom's difficulties lie primarily in the billions it
has had to pour into projects such as the South Stream pipeline to
Europe and development of new fields and links in Yamal.
Both are long-term strategies designed to keep
Gazprom's best-paying clients dependent on Russian gas for future
decades. Yet their annual $13bn cost swallows roughly a quarter of
the net earnings expected for 2011.
"All these pipelines are being built at record costs.
In fact, Gazprom has abandoned the gas storage expansion programme to
build more pipelines," said Korchemkin.
Some analysts saw more serious flaws in Gazprom's field development and pipeline construction ambitions.
They note that Europe wants to limit its Russian
purchases while relying on Gazprom to meet surges in demand. And China
is still haggling with the firm over tariffs and prices as it looks to
other suppliers in Central Asia.
"The problem for Gazprom at its giant new field in
Yamal is the lack of steady clients for all that gas," said Troika
Dialog analyst Valery Nesterov.
"This is a question of capital investments and
strategy. But now there is an understanding that (European storage
development) is important to business," Nesterov said.
Alfa Bank said some EU states may in fact have been
overstating their "supposed undersupply" figures as a negotiating
tactic aimed at reducing the overall amount of gas they have to buy from
Gazprom this year.
Nesterov for his part said Gazprom this month told
analysts it still viewed Europe as a priority, despite its Asian
"Gazprom intends to keep a 30% share of the
European market. Europe's dependence is here to stay for the long term,"