RUSSIA - Gas Exports.

Moscow has recently confirmed that the country's exports of natural gas this year will be higher than in 2005, when they had risen 8.04% to 152.478 BCM, down from 189.4 BCM in 2003. The state-controlled gas firm Gazprom, which has a monopoly on gas exports, still believes its sales out of Russia would be raised to 360 BCM/year by 2010, although independent experts say Gazprom's exports could resume a decline which occurred in recent years due to its limited investment in Russian gas E&P.

According to a plan adopted in 2000, the growth of Russia's gas output should be limited to 700 BCM/year by 2020, with non-Gazprom firms to produce up to 170 BCM/y. Coal production would rise from 210m t/y in 2000 to 430m t/y by 2020. Power generation should increase from 880 bn kWh in 2000 to 1,620 bn kWh by 2020. The plan for gas and exports is far more conservative than one projected in 1997 by Gazprom (see Vols. 55 & 63, Gas Market Trends No. 8).

Alexander Medvedev, head of Gazprom's export arm Gazexport on March 13, 2006, told reporters the company expected this year's export revenues to rise 27% due to high global energy prices. He said Gazprom's revenues would rise to US$33 bn from $26 bn in 2005.

The European Union (EU) bloc of 25 countries relies on Russia for over 25% of its energy needs, with Germany importing over a third of their natural gas from Gazprom. Most east European members of the EU are completely depended on Gazprom supply of natural gas.

Gazprom sells less than 28% its gas output to Europe, which accounts for about 70% of its revenues thanks to high international oil prices. Its remaining production of natural gas, which in 2005 amounted to 547.249 BCM (up 0.82% from 2004), is sold to the Russian market at heavily subsidised prices. Local gas prices will remain heavily subsidised despite repeated EU demands that Moscow liberalise the domestic energy market in line with a free system in Europe.

Even if Gazprom's external partners, such as Wintershall of Germany, is to sell its Gazprom gas back to the Russian market this would have to be at the much lower domestic prices (see down7-RusEnrBaseAug4-06). The situation in Russia is not likely to change much during President Vladimir Putin's final term in the presidency to 2008 (see who's who in Part 5).