Russ Oil-Gas

25 June 2009 - The Moscow Times by Anatoly Medetsky - Gazprom deputy chief Alexander Medvedev defended the company's sales policy on Wednesday, responding to reports that the gas producer has lost part of the lucrative European market. Customers were buying less gas only temporarily because they built up large reserves last summer in anticipation of higher prices at the start of this year, said Medvedev, the company's exports chief. Gazprom at the time posted better sales growth than one of its rival's, Norway's StatoilHydro, he said. "Actually, this can be characterized as a shift in demand for an earlier period," Medvedev said at a news conference. "That's why we, in Gazprom, don't see any reason for panic and pessimism." Data from the International Energy Agency showed last week that Gazprom's market share in Europe and Turkey plunged to 16 percent in the first quarter of this year, compared with 30 percent last summer. European customers preferred buying cheaper LNG in spot trading from Gazprom's competitors because contracts with the Russian company fix prices for pipeline gas to those of oil six to nine months ago, when it hovered at record-high levels. Russia's reputation as a gas exporter also took a hit in January, when a dispute over supplies and transit in Ukraine led to widespread shortages throughout much of Europe. Gazprom exported to Europe just 74 percent of what it planned to in the first half of this year, or 59.5 billion cubic meters, Medvedev said. Demand in Europe has been rising again since April as Gazprom's prices decline, Medvedev reiterated. There was no commercial sense in offering discounts to increase the volume of sales in the first quarter, Medvedev said. Deputy Energy Minister Sergei Kudryashov criticized Gazprom's loss of sales volumes to Europe at an energy conference in Moscow on Tuesday, according to a copy of his speech on the ministry's web site. The ministry retracted the comments later that evening, saying the wrong document was posted because of a technical error. It was replaced with a different, shorter address that did not contain the criticism. Gazprom anticipates an average price of $280 per thousand cubic meters for its gas this year, which would be on par with the 2007 level, Medvedev said. He described the price as "quite satisfactory" and insisted that it would allow the company to develop. Gazprom is planning to export 142.1 billion cubic meters of gas to Europe and Turkey this year, a decrease from last year's 158.8 bcm. The gas will come from its own production, independent producers and Central Asian imports, he said.