Gazprom sees no need for Europe price war, no US LNG threat

Gazprom provides a third of the gas used in the European Union but relations have soured over Ukraine, prompting the EU to look for alternatives to Russian energy imports.

One potential alternative for gas is LNG from the United States where exports are expected to rise sharply between now and 2019.

“There has been a lot of talk that LNG from the United States is a panacea (for those looking to switch away) from Russian gas... But at the moment there are more preferable destinations for U.S. LNG than Europe,” Medvedev said.

“Price will determine the competitiveness of U.S. LNG. I don’t see U.S. LNG flowing to Poland or Portugal.”
Medvedev reiterated that Gazprom’s exports to the EU and Turkey may exceed a record-high 165 billion cubic meters (bcm) per year, topping deliveries of 159 bcm in 2015.

Gazprom generates more than half of its revenue in Europe where Medvedev said sales would reach $28 billion this year.

Some analysts have said that in order to preserve its market share in Europe, Gazprom would have to cut prices.

“We don’t see any need to wage a pricing war,” Medvedev told reporters.

He said gas prices in the second quarter would be the lowest this year but would rise from the third quarter.

Last week, he said the company sees Russian gas prices in Europe this year averaging $167 to $171 per 1,000 cubic meters. That is down from about $240 in 2015, reflecting lower crude prices hitting indexed gas pricing.

“We don’t need astronomically high gas prices, we need prices which allow us to do our job,” Medvedev said.
He said that Gazprom’s production costs are one of the industry’s lowest at around $20 per 1,000 cubic meters.