The Oil Drum

Some measure of the importance of Gazprom to Russia can be estimated by the BBC story which notes that the company provides half of Russia’s energy, and 15% of its hard currency earnings. Of equal importance to those who would buy some of that energy Gazprom will likely send it to you through it’s pipeline company, Tyumenstransgaz.

Over the past couple of years we have seen a decline in the speed with which Russia is developing its major gas reserves. Shtokman is now considerably delayed, as is the anticipated development of the Kovykta field. These make it less likely that the US will see much of this gas production, which seems increasingly intended for domestic and European consumption. But that may also be a concern for the Chinese and Asian markets, whose increasing needs were supposed to be met, in part, by increased exports from Russia.

You may have noted a couple of posts recently concerning the relationships between Gazprom and its customers.  More particularly the pressure being put on places such as Armenia, Belarus and now the UK to allow Gazprom to take over the distribution companies for the natural gas.  Well, just in case the message wasn't getting through, there now comes a new threat. The West has been benefiting too long from Russian largesse, in terms of oil availability.

Russia plans to cut oil supplies to Europe, diverting shipments from "overfed" European markets to Asia, Semyon Vainshtok, president of pipeline monopoly Transneft, said in an interview published Monday.

"We have overfed Europe with oil. Every economics textbook says that surplus supply lowers prices," Vainshtok said in an interview published in Nezavisimaya Gazeta. "But we can't reduce supply -- all our exports are oriented toward Europe."

That will change with the construction of the Eastern Siberia-Pacific Ocean pipeline, which will feed energy-hungry Asian markets with up to 1.6 million barrels of oil per day, Vainshtok said.

"As soon as we turn to China, South Korea, Australia, Japan, it will immediately take away a portion of oil from our European colleagues," Vainshtok said.