Alieksiej Miller, szef Gazpromu, wygłosił przemówienie na corocznym Generalnym Zebraniu European Business Congress, w Cannes 10-11 czerwca 2010 r.

Kilka tez wykładu:

• gaz z rurociągów będzie podstawą zaopatrzenia Europy, pomimo konkurencji LNG
• ceny spotowe wkrótce się podniosą, gdy odbuduje się popyt, zaś kontrakty długoterminowe gwarantują większą stabilność, a dzisiejsze elementy rynku spotowego uwzględnione w wielu kontraktach, mogą być wtedy droższe.

Projekt wypowiedzi:

“Natural Gas: Energy of the 21st Century”

Ladies and gentlemen,

It is my great pleasure to address you today in this stunning location. I would like to thank the European Business Congress for the opportunity to speak before such a distinguished audience. The fact that those present in the room preferred discussion on the future of natural gas over the seductive mix of Croisette, croissants and champagne, once again proves the relevance of this topic.

Recently, there were many myths and theories about the gas market, which, as in the TV program "MythBusters», we do need to examine.

Role of shale gas

Perhaps the most discussed topic both among professionals and in the business-focused media has been shale gas. Is it possible to talk about a "shale revolution", which will shake the foundations of the gas industry? Or is it a fad, sort of a "shale fever" that one has to pull through?

First of all, it should be reminded that the production of shale gas and, in general, of unconventional gas is no news for the gas industry. Production of gas from "tight reservoirs" has been going on for decades in large volumes, and it is only in the general public that this topic has been considered “news” lately.

The role of Shale gas production projects is predetermined by their technological and economical specificities. I am referring to the relatively low output at wellheads and their sharp depletion after the first years of production, the large numbers of drilling operations required, the constant need to move to new areas of development, the high investment requirements, etc. – As a result, shale gas can serve as a local source of energy, compensating the reduction of production volumes (or their absence) of traditional gas in regional markets.

In this regard, even the leader in shale gas extraction, the United States, only uses this energy source to compensate for the decline of their traditional field deposits. It is obvious that in other markets shale gas will also play the role of a complementary source of gas within the regional gas balance. This is an important and a useful role for shale gas. Additional possibilities of balancing the gas markets have never been unwelcomed. If you like foie gras, it does not mean that buttery soft tenderloin steaks grilled to your taste are redundant.

Conventional natural gas plays a crucial role on the market. Time-tested production technology, reliable methods for determining extractable reserves, operational management of fields while maintaining stable levels of production for decades - all these properties make traditional natural gas a unique energy source that can provide energy security on a global scale!

Increased attention to shale gas in recent years is due to the coincidence of three factors: first, the growth of shale’s share in the US gas balance due to the effect of accumulated investments in the sector and the decrease of "conventional" production; secondly, commissioning of major facilities for the extraction and liquefaction of gas in the world, in accordance to plans adopted earlier; and thirdly, the simultaneous decline of the overall demand for gas because of the global financial and economic crisis.

It is obvious that this combination of factors is temporary. In the first quarter of this year, gas production volumes in the U.S. have remained unchanged, but LNG imports were ramped up by 60%. Commissioning of facilities for gas liquefaction around the world amounted to 11.4 million tons in 2008, to 15.6 million tons in 2009, yet in the current year, only 1.4 million tones of LNG new production capacity will go on stream. At the same time, demand for gas in the world is picking up. Therefore, the conditions under which shale gas by the end of last year could hit record highs no longer exist.

Let me repeat that shale gas will play a very important and useful role of balancing natural gas markets at the regional level, but there are no reasons to crown it and elevate it to the throne.

Competitiveness of pipeline gas

The next myth which should be examined is the assertion that competition from liquefied natural gas may force out pipeline gas from the European market.

First of all, LNG use in Europe is local; it is consumed predominantly in coastal regions close to regasification terminals. Most supplies to end-consumers come through pipelines. The European transmission system has been purposefully designed to bring natural gas to clients in the contracted volumes and in due time. In other words, quite often it is technically impossible to deliver regasified LNG from the terminal to consumers, let us say, in Central Europe. If some day the decision was taken to build a new gas transportation network especially for LNG to reach the most landlocked parts of Europe, cost s would be so high that it would erase all the competitive advantages of this energy source. Pipeline gas, on the other hand, has been reaching Europe for decades; it can draw on existing distribution infrastructure and is most likely to remain a devoted mainstay.

In recent years, a lot of publications and expert commentaries claimed that low prices on the European spot market make Gazprom gas uncompetitive, and furthermore, that the system of long-term contracts with price formula linked to stock exchange quotations of oil products has become obsolete. Let us examine this opinion.

Gazprom is effectively present on the spot markets and we do understand why many consumers turn to it. The main secret is simple: low prices. However, in the long run, no one can guarantee lower prices. Spot prices simply fluctuate in a more dynamic fashion due to the limited liquidity and depth of European spot markets. It is interesting to note that a couple of years ago, when spot prices were higher than the price of pipeline gas, I did not receive a single phone call from our customers asking to adjust the long-term pricing formula upwards. Today, in several cases we have agreed to take into account the spot market component. But please note: when in a couple of years the market bounces back, do not ask us to revert back to previous price practices.

The spot market serves as a compensating mechanism, opening opportunities for the swift purchase of additional volumes of gas or for gas surplus sales, but it can hardly substitute long-term contracts. Pegging pipeline prices to spot market prices will lead to a situation in which the tail wags the dog. In the past, spot market prices have often exceeded prices for pipeline gas, especially during winter peak demands. Fluctuations go both ways. We expect the gap between pipeline gas prices and spot prices to close no later than 2012.

The current situation on spot markets is not a reason to reject a reliable and efficient system that provides and will continue to provide security and reliability for suppliers and consumers alike.

The system of long-term trading in natural gas in continental Europe was invented not by us but by European entrepreneurs several decades ago, and it is based on several basic principles. This is the system of long-term contracts, pegged to oil prices and the system of guarantees ‘take-or-pay’ and its analogue ‘ship-or-pay’. These principles protect the interests of those who invest in expensive long-term projects in order to ensure the safe production, transportation and distribution of gas; but, let me also emphasize, this equally protects gas consumers. The benefits of these principles are enjoyed also by European businesses - wholesalers, transit operators and European end-consumers. All of them need stability and reliability.

European demand for gas imports

This is of paramount importance since Europe will have to ramp up gas imports in the future. At the moment, the financial and economic crunch negatively affects gas consumption. At the end of 2009 and in the first four months of 2010, a dynamic uplift in gas demand in the EU countries was registered, but the month of May has seen the positive trend reversed. As we see, financial turmoil in the euro zone has started to affect energy markets.

Nevertheless, we are confident that in the long term, gas demand in Europe will be on the rise, while its domestic production will follow a rapid downturn tendency. Independent think-tanks’ forecasts show that Europe will be forced to import gas to the amount of up to 415 bcm per year by 2020, which will go further up to 500 bcm by 2030.

Role of gas in emission abatement

Let’s go further. Here is another popular thesis: "The future is for renewable energy". That could be true! However, when will this future come? In the 1960s, after the first flight into outer space, there was an expectation that tomorrow, interplanetary ships would surf our universe, large-scale development of near-Earth space would begin, and flying to the Moon would become as routine as a trip taken by tram. But 50 years have passed, and we continue to explore the space, and none of us has been frequenting the Moon, and probably will not, while trams continue to run.

Maybe it is not bad that European authorities are ready to invest huge sums of taxpayers’ money in the widespread use of renewable energy. However, we must not forget that it is natural gas which has all the necessary qualities to play a pivotal role in the energy structure of the current century. Moreover, it is gas that will be at the forefront of the struggle to achieve an affordable, reliable and competitive energy for the world's growing population.

This energy source is the most environmentally-friendly fossil fuel, and the fuel itself and technology for its application are very accessible. Let me give two examples. Increasing the share of natural gas by 1% in the European Union’s energy mix, CO2 emissions would be reduced by more than 3%. Moreover, by replacing every second coal-fired power unit with a gas turbine unit, Europe would meet almost half of its goals for 2020 in reducing carbon dioxide emissions.

At some point, renewable energy will become one of the crucial components in the overall energy structure. But in the foreseeable future, this element should be balanced with sufficient offer of traditional facilities and proven technologies. The universality of gas power plants makes natural gas the best choice.

Gazprom welcomes the development of new energy technologies, but we call for a sober approach so as not to be carried away by myths and misconceptions. We have not forgotten how cold the last winter was. Did anyone attempt to figure out: how low would temperatures in the homes of European citizens have dropped, if they only relied on wind and sun? You know how the British media adore our company, Gazprom. But this winter, it had no choice but to admit that Russian gas saved England from freezing. During peak demand, when winter energy consumption hits record highs, there are no viable alternatives to natural gas.

We are aware that some European governments are considering the introduction of mandatory fixed quotas for renewable energy. Let me leave out the question what may lay behind the idea of making such a "gift" to consumers and note another aspect of this issue. We in Russia are very familiar with a Soviet-style planned economy. And the result is also very well known: under mandatory distribution, natural incentives to improve competitiveness evaporate. This is a disservice not only to consumers but also to the new alternative energy.

We have already highlighted the use of natural gas in the power industry to help Europe achieve the noble goal of reducing harmful emissions into the atmosphere. Another possibility is a more intensive use of gas in transportation. Europe has an extensive gas supply system and requires relatively little investment to build a wide network of filling stations for vehicles running on gas. This will significantly reduce harmful emissions from millions of exhaust pipes. We in Gazprom believe that gas has excellent chances to compete with petroleum products in their main market - in the area of transportation.

The world turns to more efficient and environmentally friendly fuels, and these developments solidify our confidence that natural gas will play an increasingly important role, being a "greener" fuel than oil and coal.

Ladies and gentlemen,

I nurture a hope that our successors will meet again at the end of the century in this remarkable venue, and will note with great satisfaction that natural gas should be credited with making the Earth an ecologically safer place than it used to be.

Thank you for your attention.
Merci!

Cannes, France, 10-11 June 2010.