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© BP 2014
Russian Gas: What’s ahead?
Moscow School of Economics, MSU
October 2, 2014
Vladimir Drebentsov
Head of Russia and CIS Economics, BP
plc.
Vice President, BP Russia
© BP 2014
Russia’s Gas production 2012-2013
St Bcm
Source: CDU TEK
35
45
55
65
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
2013 2012 2014
© BP 2014
Gas production by company (incl. APG)
-15
-10
-5
0
5 Jan-Jul 2013 Jan-Jul 2014
Growth, y-o-y, St Bcm
Source: CDU TEK
© BP 2014
Gazprom is steadily losing domestic market to independent
producers
Gazprom
%
Source: CDU TEK, BP calculations
57
49
40
60
80
100
2005 2010 2013 1H2014
Share in production Share in consumption Share in consumption (w/o tech needs)
© BP 2014
Reduction in flaring – more gas out of brownfields
70
75
80
85
2010 2011 2012 2013 Jun-14
% Associated gas utilization
Source: CDU TEK
© BP 2014
Russian gas flows to Europe
5
10
15
20
Ja
n
Fe
b
Mar
Ap
r
May
Ju
n
Ju
l
Au
g
Sep
Oct
No
v
Dec
2009-13 range
2013
2014
0
20
40
60
80
J…
F…
M…
A…
M…
J…
J…
A…
S…
O…
N…
D…
2009-13 range
2013
2014
Russian gas exports to Europe European gas storage
St Bcm St Bcm
Source: CDU TEK, GIE
© BP 2014
North-West Europe gas imports from Russia
177
50
81
62
38
102
-
50
100
150
200
250
300
01/01/2011 01/06/2011 01/11/2011 01/04/2012 01/09/2012 01/02/2013 01/07/2013 01/12/2013 01/05/2014
Ukrainian entry Belarus Entry Nordstream entryMcm/d
Source: ENTSOG
Ukrainian flows share, %
Aug-13 53.6
Aug-14 30.6
© BP 2014
0
5
10
Jan Feb Mar Apr May Jun Jul Aug Sep Oct Nov Dec
Exports range 2009-13 2014 2013
Source: CDU TEK
St Bcm
Russian gas flows to CIS
© BP 2014
How does Ukraine live without Russian gas?
© BP 2014
Russian gas prices still vary a lot by market
$/ MmBtu
Source: Gazprom
0.00
2.00
4.00
6.00
8.00
10.00
2008 2009 2010 2011 2012 2013
Russia FSU RoW
© BP 2014
Gazprom gas revenue still heavily depends on gas exports,
and Europe is the prime destination
Revenue: $84.3 billion Sales: 551 Rus Bcm
Europe
31%
Domestic
52%
FSU
17%
2008
Source: Gazprom
FSU
17%
Europe
60%
Domestic
23%
2013
Europe
39%
FSU
12%
Domestic
49%
Sales: 462 Rus Bcm Revenue: $90.8 billion
FSU
15%
Europe
58%
Domestic
27%
© BP 2014
Yet Russia is much less dependent on gas exports
42.6
11.5
0
10
20
30
40
50
60
1Q10 2Q10 3Q10 4Q10 1Q11 2Q11 3Q11 4Q11 1Q12 2Q12 3Q12 4Q12 1Q13 2Q13 3Q13 4Q13 1Q14
oil gas
%
Source: CBR
Share in total exports of goods and services
© BP 2014
Gas also contributes much less than oil to the federal
budget
37
48 54
46 50 50 50
0%
20%
40%
60%
80%
100%
2007 2008 2009 2010 2011 2012 2013
Oil&gas revenues Non-oil revenues
Source: MoF
Of
which:
45% -
oil,
5% -
gas
© BP 2014
Russia’s gas production and domestic consumption
0
200
400
600
800
2000 2005 2010 2013 2015 2020 2025 2030 2035
Production Consumption
Other independents
Gazprom
St Bcm
Source: Central Dispatch Unit of Ministry of Energy, BP 2035 Global Energy Outlook
Forecast
Novatek
PS
A
Oil
com
panies
© BP 2014
How much gas will Europe need to import? – EC’s view
ETS price assumptions
EU energy imports EU fuel mix
Source: EC
© BP 2014
High uncertainty around EC’s reference scenario
Source: EC, Temaplan
© BP 2014
* 3-month moving average Source: BAFA, BP calculations
$/Mmbtu
Russian gas was competitive in Germany in 2013
11.4
6.7
6.0
9.0
12.0
15.0
Jan-12 Apr-12 Jul-12 Oct-12 Jan-13 Apr-13 Jul-13 Oct-13 Jan-14 Apr-14 Jul-14
Russian contract*
Average 13.3
Average 9.4
Average 11.0
Average 10.5
© BP 2014
Regional supply patterns differ
Bcf/d China
Bcf/d North America
Bcf/d Europe
Sources of gas supply by region
-20
0
20
40
60
80
100
120
1995 2015 2035
-20
0
20
40
60
80
100
120
1995 2015 2035
12.6
-20
0
20
40
60
80
100
120
1995 2015 2035
Net pipeline import
Net LNG import
Shale gas
Other unconventional
Conventional
Energy Outlook 2035
© BP 2014
China’s gas imports from Central Asia
0
1,000
2,000
3,000
Jan-10 Jan-11 Jan-12 Jan-13 Jan-14
Source: China Customs Committee
Mcm
© BP 2014
Gazprom production by field
0
150
300
450
2009 2012 2015 2018 2021 2024 2027 2030
Yamburgskoye Urengoyskoye
Zapoliarnoye Bovanenkovskoye
Other Europe and West Siberia, incl Yamal East Siberia
45
Source: MoED
Rus
Bcm
© BP 2014
China gas import price
9.83
9.39
8.64
8.00
10.50
13.00
Jan-13 Feb-13 Mar-13 Apr-13 May-13 Jun-13 Jul-13 Aug-13 Sep-13 Oct-13 Nov-13 Dec-13 Jan-14 Feb-14 Mar-14 Apr-14 May-14 Jun-14 Jul-14
Total Imports Turkmenistan Uzbekistan$/Mmbtu
© BP 2014
Government view of Russia’s gas production
0
300
600
900
2009 2012 2015 2018 2021 2024 2027 2030
Other producers Gazprom Group Sakhalin PSA842
Rus Bcm
Source: MoED
72% 64%
668
© BP 2014
© BP 2014
Gazprom is steadily losing domestic market to independent
producers
85.3
78.2
71.3
69.1
78.4
69.0
60.0
58.2
50
70
90
2005 2010 2013 1H2014
Share in production Share in consumption
Gazprom
%
Source: CDU TEK, BP calculations
© BP 2014
0.00
2.00
4.00
6.00
8.00
10.00
12.00
3Q11 4Q11 1Q12 2Q12 3Q12 4Q12 1Q13
Russia FSU RoW
Russian gas prices still vary a lot by market
$/ MmBtu
Source: Gazprom
0.00
2.00
4.00
6.00
8.00
10.00
2008 2009 2010 2011 2012 2013
Russia FSU RoW
© BP 2014
Gazprom volumes and revenues
63
56
52
54
56
58
60
62
64
2009 2010 2011 2012 2013 (9m)
Gas sales in Gazprom's total net revenue* %
* The balance comes from selling condensate, oil products, electricity,
etc.