Russian president-elect Putin refuses to hike domestic gas prices further
Russia's president-elect Vladimir Putin has called on state-owned Gazprom to improve its operational efficiency and refused to allow an increase in domestic gas prices above earlier agreed levels, which Gazprom wanted to compensate for a planned increase in its tax burden.
I understand that the burden [on Gazprom] is to rise, primarily due to an increase in the mineral extraction tax on gas, but [compensation] should be found through a cut in expenses rather than an increase in tariffs," Putin, who is currently prime minister, said at a governmental meeting Friday to discuss the Russian gas market, according to the meeting's transcript posted on the government's web site.
ast week it was revealed that Gazprom had unexpectedly proposed raising domestic gas tariffs by 26.3% starting from October 1, for its industrial customers, to help compensate for the company's increased tax burden. The proposal was on top of the initial plan for a 15% increase in domestic gas tariffs from July 1.
Natural gas MET rates for Gazprom are to increase to Rb509/1,000 cu m ($16.95/1,000 cu m) in 2012 from Rb237/1,000 cubic meters in 2011, and further to Rb582/1,000 cu m in 2013 and Rb622/1,000 cu m in 2014, in line with changes to the country's Tax Code approved in November.
At the meeting, held in the town of Kirishi, in Russia's northwest, Putin said the government would be ready to discuss other ways to support Gazprom but disclosed no details.
Analysts did not rule out that government may agree on additional tax breaks for some of Gazprom's projects.
"Putin expressed support for the planned Yamal and Shtokman LNG projects, which may indicate some progress in the discussion for Shtokman tax breaks," analysts with Alfa-Bank said in a note.
The analysts said the general tone of the discussion was more in support of independent gas producers, such as Novatek, and oil companies, whose gas production is set to grow. "We do not believe the occasional aggressive statements made against Gazprom are a signal of further attacks on the company's domestic gas business, but rather indicate the government's desire to expand the presence of independents," the analysts said.
Russia's biggest oil producer, Rosneft, expects to boost its gas production by 15 Bcm/year to its output by 2014, which would represent a 27% increase from 2011, Energy Minister Sergei Shmatko said at the meeting. TNK-BP is to add 9.7 Bcm in the same period, and Novatek will add 7.8 Bcm from last year, Shmatko said. The planned increases require greater guarantees for access to trunk pipelines--which are controlled by Gazprom--for the independents to make the plans possible, Shmatko said.
Shmatko said an increase in gas output to the all-time high of 670 Bcm in 2011 was mainly thanks to independent producers rather than Gazprom. "In particular, Novatek produced over 15.5 Bcm, with the total share of independent producers, including oil companies, amounting to 24% [of the country's gas output]," Shmatko said.
Shmatko also said Gazprom's inefficiencies had led to issues during peak demand periods this winter.
The gas production and transportation networks faced several peak loads this winter, when gas demand both domestically and abroad jumped amid severely cold temperatures throughout Europe and Russia, particularly in early February, Shmatko said.
At the time, at least eight EU countries said they saw a reduction in Russian gas supplies, with Italy's Eni, Austria's OMV and Germany's E.ON Ruhrgas all pointing to a 30% cut in their supplies.
Shmatko said Gazprom was spearheading a national program to increase capacity of underground gas storage facilities that would allow greater room for maneuver. "A total of 65 Bcm of gas was pumped into storage facilities, which is 9.1 Bcm less than was envisaged by the program," Shmatko said.
Daily gas take from storage facilities amounted to 647 million cu m, 122 million cu less than envisaged, he added. He didn't specify a time period.
Gazprom allocated just Rb16 billion for the construction of new gas storage facilities in 2012, which is not enough, Shmatko said, but criticized Gazprom for the slow repair of the existing trunk pipelines.
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