Asian market can be profitable for Gazprom, expert believes

Asian gas market can be profitable for Gazprom, given the fact that prices there are on average higher, analyst at "Eurasia Energy Observer" Andrej Tibold told Trend on April 15.
“Gazprom has indicated that it aims to turn to the Eurasian market in the future, which it considers as a so called “mega market". However, this will take at least a decade, but trend is clearly there,” Tibold said.

Russia's top gas producer Gazprom warned the European Union this week against moves to block Moscow's plans to bypass Ukraine as a transit country for its gas to Europe and said it needed guarantees on gas purchases.

Russia is pushing ahead with plans to build a pipeline to Turkey and further on to Greece via the Black Sea, in line with its plans to stop exporting gas via Ukraine by 2019.

Meanwhile, Reuters reported citing Gazprom head Alexei Miller that "if someone thinks about blocking Turkish Stream...it is a very serious mistake."

He added that volumes could go to other markets and construction of the pipeline could be paused, if necessary.

In particular, according to Miller, the gas which Europe refuses to buy may be diverted to Asia.

“For Gazprom it is the movement from a European to a Eurasian strategy. We understand that we are witnessing the emergence of a new mega market – the Eurasian market," Miller said, adding that prices in Europe will depend increasingly on Asian levels.

Andrej Tibold said that Gazprom has made it clear that it does not intend to extend its transit contract through Ukraine after 2019.

"This firstly affects the countries of South Eastern Europe and the Balkans, since there is sufficient capacity installed to maintain stable supplies of Russian gas to North Western Europe,” Tibold said.

However, annulling transit through Ukraine would also require the renegotiation of existing supply contracts, Tibold believes.

“Most of the supply contracts have Ukraine’s western border as the delivery point. In that case Gazprom’s customers could come with their own demands and could for example demand further price reductions, which would further protract the process,” he said.
The question is of course, what alternatives supply routes will be available, according to the expert.

“I do not believe that by 2019 the EU infrastructure will be ready to receive gas via Turkish Stream instead of through Ukraine,” he said.

Tibold also believes that Europe will not be able to go on without Russian gas, since alternatives are still very limited.

“Russian gas is abundant and capacity to expand is available. Also Russian gas is relatively competitive,” he said.

/By Trend/