Overview

Russia has 31.3 trillion cubic metres of proven gas reserves, constituting 16.8% of the world’s total, according to BP’s Statistical Review of World Energy 2014. The country also holds the world’s second-largest gas reserves, most of which are in Western Siberia, a difficult and expensive region to access because of its extreme weather conditions. Gazprom’s share accounts for 72% of Russian reserves.

Russia was the world's largest producer of gas for a long time, but since the shale boom in the United States it has been ranked second by sources including BP's Statistical Review of World Energy. However, it remains the world's largest exporter and the International Energy Agency estimates the country will provide more than 30% of gas imports to the EU (170 billion cubic metres) and China (75 bcm) by 2035. Russia accounted for 32% of the EU’s imports, or 161.5 bcm, in 2013.

Russia holds a central position in Eurasian and global gas security, although this is being challenged by sanctions over Crimea and events in eastern Ukraine. Gazprom, Russia’s state pipeline export monopoly, has also been drawn into pricing disputes with a number of its main European customers.

Russia consumes around 70% of the gas it produces, and non-Gazprom producers – chiefly Novatek and Rosneft – have started supplying a greater number of domestic customers, poaching clients from Gazprom. Rosneft aims to produce 100 bcm/y by 2020 and become the second-largest Russian producer after Gazprom – a direct challenge to Novatek, the current number two.

Russia’s economy has been stagnating and this is expected to affect gas consumption, with different companies competing for customers signalling a shift from what the Oxford Institute for Energy Studies has called the period of Gazprom’s monopoly to an oligopoly. Meanwhile, exports to Europe look uncertain as the region tries to diversify away from Russian gas and reduce prices. Deliveries to the former Soviet Union also look unclear as a result of the political situation and pricing dispute with Ukraine, which saw Russia cut off gas shipments completely on 16 June 2014. Gazprom previously stopped deliveries to Ukraine in 2006 and 2009.

The prognosis for eastern markets is more optimistic, Moscow liberalised LNG exports in 2013, opening up the lucrative Asia Pacific market to Novatek’s Yamal LNG project and Rosneft’s planned LNG facility on Sakhalin.

Gazprom and China National Petroleum Corp. signed a 38 bcm/y pipeline supply deal in May 2014, which will allow Gazprom to develop resources in East Siberia, namely the 1.2 tcm Chayanda and 1.5 tcm Kovykta fields. Gazprom will build the 61 bcm/y Power of Siberia pipeline to connect these fields with the Asian market and Vladivostok, where it plans to build the Vladivostok LNG plant.

Other companies, led by Rosneft, are lobbying to gain access to the pipeline, but Gazprom has signalled it intends to fill the pipeline with its own gas.

Page updated: 08/09/2014