Kate Mackenzie Gazprom’s quest for world domination

Despite its efforts to cut spending and postpone projects under a weight of debt, Russian gas giant Gazprom has managed to make some significant overseas partnerships in recent months. It plans to assess gas reserves in Venezuela and last month announced it would invest $2.5bn in the  Nigaz joint venture with Nigeria’s national oil company. Both raised concern in the west – the Nigerian deal with Europe, which has traditionally been the main source of foreign investment in Nigeria, and the Venezuelan agreement with the US government.

Suspicion of a Gazprom quest for world domination has been heightened over the past few years, particularly since Gazprom turned off supplies to Ukraine in the 2005/06 winter and reduced supply in early 2008 and again then, this year.

This prompted an pan-European approach  to securing non-Russian gas supplies with a sense of unity unprecedented on energy issues to announce support and funding for the Nabucco pipeline. Gazprom meanwhile is championing another pipeline, South Stream, in a move often seen as an attempt to thwart Nabucco.

But are these fears overblown?

Jonathan Stern of the Oxford Institute for Energy Studies believes fears of Gazprom’s aims to monopolise European gas supply may have been exaggerated.

From The National:

He also questions whether the €20 billion (Dh104.2bn) South Stream development competes directly with the €8bn Nabucco project. South Stream, he says, is aimed at bringing existing Russian gas supplies to Europe by a different route, while Nabucco would pipe in gas from new supplier countries.

“South Stream has gas and markets, but a very high price tag. Nabucco has no committed gas and markets, but a low price tag. They couldn’t be more different,” Prof Stern says.

Professor Stern says Gazprom needs the South Stream pipeline to shore up its own transit. The company’s biggest problem is unreliable transit countries, he says, and points out the company is also suffering from the low prices set by the government at home in Russia – its biggest market.

But for Nigeria and Venezuela? Political motives are much more likely there, Stern believes: “No one expects Gazprom to make vast sums of money in Nigeria and Venezuela.”

Related links:

Venezuela and Russia forge links (FT, 22/07/09)