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Medvedev Announces that Novatek may soon Break Gazprom's Monopoly

By James Burgess | Wed, 23 January 2013 22:27 | 0

Back in 2006 Russian President Vladimir Putin gave the state controlled natural gas company Gazprom the exclusive rights to export its product in an attempt to prevent competition from domestic suppliers reducing the gas price that could be charged.

On Wednesday, in an interview with Bloomberg Television, Prime Minister Dmitry Medvedev mentioned that Gazprom may have its monopoly status rescinded, as long as doing so does not reduce prices in Europe and damage the Russian economy.

“It is possible, because there are other independent gas producers. But we mustn’t lose money, that’s the most important thing. Money comes first,” he said.

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Novatek is Russia’s second largest gas producer, and is the firm trying to undermine Gazprom’s monopoly. Currently it may only sell its product domestically, but it is hoping to weaken Gazprom’s status by pushing to have LNG excluded from the monopoly law. The long term goal will be to muscle in on natural gas exports as well.

Medvedev said that all consequences of breaking Gazprom’s monopoly must be considered before any decision is made, but even Putin has suggested that the monopoly could well be ended; although he assures that no such plans exist for the immediate future.

The Kremlin relies heavily on revenues from natural gas exports, receiving over 50% of its income in 2012 from the oil and gas industry. Fears are that any disruption to Gazprom’s power could lead to a drop in market prices, especially as demand in Europe has weakened over the last year as countries reduce their consumption to turn to Russia’s EU competitor Norway.

By. James Burgess of Oilprice.com

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