A Gazprom delegation led by Alexander Medvedev, Deputy Chairman of the Company's Management Committee is taking part in the 17th Sakhalin Oil & Gas 2013 International Conference.

During a keynote session Alexander Medvedev delivered the speech – Variable Global Energy Markets and Future Development of Oil and Gas Industry in Sakhalin.

Alexander Medvedev was particularly focused on new trends in the industry and geopolitical factors that affected the global energy market, namely, the resource base expansion through unconventional gas and securing the status of the premium market by Asia-Pacific countries. In addition, the speaker highlighted the significance of some factors, such as regulated gas prices in China, energy trading on the spot market and potential competition among liquefied natural gas producers in Asia-Pacific.

Alexander Medvedev also stressed that the large-scale changes in the energy industry, including the steady uptrend in demand for energy carriers and the emergence of new areas where natural gas can be utilized, were making some extra room for the gas industry to evolve further. In that respect, he noted, that according to preliminary estimates, conventional gas reserves in Russia made up no less than 250 trillion cubic meters, and unconventional gas reserves could reach 680 trillion cubic meters. Moreover, at least 90 per cent of unconventional gas reserves are located in the Russian East, mainly Urals and Siberia.

“We are confident that a bright future lies ahead for the gas industry, adding that the share of natural gas in the global energy mix will consistently grow. As soon as the oil reserves are exhausted and coal is gone off the market because it is not eco-friendly, natural gas – as a vehicle fuel – will start to compete directly with petroleum products,” said Alexander Medvedev.

Talking about the prospects for shale gas export from the USA, it will be possible solely in a limited volume. Its wider utilization as a power generating source and as a vehicle fuel will increase the total capacity of the North American gas market and reduce its export potential. Moreover, after the inevitable price adjustment that does not cover the operating costs, supplies to Europe will not make economic sense. In addition, the price of American LNG being supplied to Asia, taking into account the liquefaction, transportation, regasification and distribution costs, will lose its commercial attractiveness. Therefore, natural gas of the Russian origin, including LNG, will keep its competitive advantages.

Alexander Medvedev also noted that the average annual consumption in Asia-Pacific stood at nearly 3.3 per cent, and the region may well demand some extra 660 billion cubic meters of the blue fuel by 2035. China and India as well as Vietnam, Pakistan, Bangladesh, Singapore, Taiwan and Thailand will primarily ensure the further growth of consumption in Asian countries, and that will allow Asian-Pacific countries to obtain the status of the premium market. Besides, according to forecasts, China will intake a quarter of the consumption growth. In such a way, by 2030 the Asian gas market will be capable to stand side by side with the European one.

In this respect, Gazprom is making strenuous efforts aimed at expanding the Company's presence in the Asian markets. Particularly, all basic terms and conditions of the upcoming Russian natural gas supplies to China via the 'eastern route' have been agreed, including the price conditions that will not be bound with prices of the American spot market. With regard to the contractual LNG and pipeline gas supplies to Asia-Pacific, Gazprom also plans to stick to long-term contracts linked to the oil prices, therefore, supporting the investment cycle and reflecting the balance of interests between a producer and a buyer.

Addressing the Conference participants, Alexander Medvedev highlighted that competition among LNG producers was the most important trend in the Asia-Pacific market.

“Until 2015 additional LNG volumes are expected to be between 5 and 10 million tons per year. However, by 2015–2016 the projects being currently developed are expected to bring in the bulk of LNG volume increase. Taking into account a rapidly growing demand for energy carriers in Asia-Pacific, that gas volumes will be immediately contracted out, and without any excesses, also leaving intense competition in place,” said Alexander Medvedev.

Addressing the audience, he noted that Gazprom, while possessing the largest natural gas reserves in the world, paid particular attention to Sakhalin's oil and gas industry which the Company considered to be the most powerful tool in conquering the Asia-Pacific markets.

In addition, it was highlighted that Gazprom Group's strategic goal was aimed at diversifying its output while extending its export and trading activities. The Company is successful in gas condensate, oil, petroleum products, liquefied hydrocarbons export as well as power generation maintaining the leadership position in this sector.

LNG projects in Asia-Pacific will allow Gazprom expand its accessible markets and boost the export of hydrocarbons. The ways of shipping cargos are also being diversified. Particularly, in December 2012 the technical and commercial feasibility of LNG export to Asia-Pacific via the Northern Sea Route was proved.

“At a time when a growing demand is expected in Asia, Gazprom is ready to make a substantial contribution to providing the reliable eco-friendly energy supplies to consumers in the region for fulfilling their needs, therefore strengthening the Company's presence in the Asia-Pacific energy market,” said Alexander Medvedev summing up his speech.