Russia drives up gas prices

Russian concern “Gazprom” announced a 10% increase in gas prices for European consumers. “The range of prices in 2017 will be $ 180-190 per thousand cubic meters”, — said the Deputy Chairman of the management Board Alexander Medvedev, speaking at an investor Day in Singapore. Last year, the Russian state gas concern was still supplying gas to EU countries at an average price of 167 dollars per thousand cubic meters.

The price increase came as no great surprise. Last year the price of oil, down to the level of $ 28 per barrel, and thereby updating its low, had doubled. Gazprom often tied the delivery of gas to oil prices. Thus, gas prices followed the dynamics of oil prices with a delay of 6-9 months. In this regard, last summer, Medvedev spoke of what has been achieved “a price floor”. Then Gazprom would agree to a discount of 30 dollars per thousand cubic meters from the export price. In General, Gazprom has with all countries of the “secret separate contracts”. The less competition, the higher the price, imposed by Gazprom.

To provide new discounts for European consumers of Russian gas giant sees no reason in 2016, Gazprom managed to increase its share on the European market from 31% to 34%. Also the number of gas export to Europe reached a record 179,3 million cubic meters. “Unlike sports we put your records without the use of doping any subsidies that are ultimately paid by consumers”, — said Medvedev unprecedented achievements of the group, ironically alluding to the doping scandal around the Russian athletes.

It is unclear whether the shift of the European electricity suppliers increase prices of gas for final consumers. However, it is known that in the past from decline in gas prices last were removed only a slight advantage: according to statistical service Eurostat, in the first half of 2016 the price of 1 kilowatt-hour for private households amounted to 6.61 cents, while the maximum price in the second half of 2013 reached 6.89 cents per 1 kWh, while during the same time period export prices of Gazprom fell from 380 to $ 170 per thousand cubic meters.

Increase company Gazprom in gas prices has no direct impact on the price for consumers in Germany, according to the Berlin gas company GASAG, which is one of Germany’s largest gas suppliers. “Implementing a diversified procurement strategy, GASAG protect themselves and their customers from one-time changes in the gas price” — the company commented on the situation. If Gazprom raised prices for an extended period of time, and the Russian example be followed by other important markets, GASAG, of course, also react to the changed market conditions, said the representative of the company.

In Oldenburg energy company EWE in connection with warm weather conditions currently rather expect demand to decline, and with it the decrease in gas prices. Since, as a rule, the price is still determined by supply and demand, explains a company representative.

German electricity providers protect their customers from price increases

At the same time, some German energy company signed with Gazprom long-term contracts with gas, linked to oil prices. Because of the somewhat grown up over the past few months, oil prices for some electricity suppliers may increase the price of gas, due to the above mentioned contracts. In EWE, however, claim that the company no longer has any significant long-term agreements with Gazprom, depending on oil prices.

In the düsseldorf energy company Uniper refused to comment on the statement by Deputy Gazprom CEO Alexander Medvedev. However, the reserves of natural gas are not only in Russia but also in other parts of the world, — said the company-postavke gas, with Germany the largest number of customers. In comparison with the dynamics of the past few years, Germany has recently reduced the price of gas. So the planned price increase will not be a big surprise.

Despite the increase in prices in the near future, European consumers will not have to worry about heating costs. Because even if the price increase is somewhat threatening, Russia is still interested in European customers: then, as the Russian government has repeatedly announced economic turn to the East, the energy sector continues to be conservative. Europe was, is and will remain a priority market for Gazprom, — said Medvedev. Despite rising prices, the company’s management believes that will be able to keep its share on the European market. Previously, along with Medvedev, Chairman of the Board of Directors of Gazprom and former Prime Minister of Russia Viktor Zubkov optimistic said that the company is able to maintain the volume of gas export “at least” at the current level.

It is connected with reduction of oil and gas in the North sea. Competition from the introduction of hydraulic fracturing technology, the Russian gas giant are not afraid: a member of the Board of Gazprom Oleg Aksyutin called the growth of shale gas “shale fever”, which, however, can not by the American example to cover Europe. The cost of its production too high to compete with natural gas, we are confident in the leadership of Gazprom.

However, forecasts of Gazprom the situation is as follows: in 2008, the Chairman of the Board of the company Alexey Miller predicted the price of gas from 500 to 1000 dollars per thousand cubic meters. However, despite the recent rise, the market is still far from these targets.

The maintenance of a stable share of the European market should contribute to and several pipeline projects of the company, in which Gazprom, despite the resistance of Brussels, again absolutely sure. Medvedev said that the construction of “Nord stream 2”, which will complement the Baltic pipeline, the EU is obliged to give its consent, since the project repeats the technological scheme of the project “Nord stream”, whose construction was approved. As for the “Turkish stream”, Moscow still hopes to eventually carry the pipeline across the Black sea towards southern Europe.