Gazprom Pushes for a Hike in Domestic Gas Prices
Executives of Gazprom and RAO UES of Russia plan to coordinate their investment programs for the next three years at a meeting with President Vladimir Putin on Friday. The state monopolies are set to lobby a price hike and lifting state regulations on energy and gas markets.
Vladimir Putin is going to hold a meeting with the government, his administration and leaders of Gazprom and RAO UES of Russia on Friday to discuss amending investment programs of the two monopolies, a source of Kommersant in RAO UES reported. The meeting is to discuss a further rapid liberalization of the power energy market. Sales in the electric energy market’s free sector are to be raised from 10 percent to 30 percent this year. The energy holding, however, will take this decision only in case Vladimir Putin agrees to raise gas prices higher by more than 15 percent, a margin described in the 2007 draft budget. Vyacheslav Kravchenko, head of the Industry and Energy Ministry’s department, said Tuesday that “the approved upper margin for in gas prices can be reviewed.”
Gazprom and RAO UES of Russia would not comment yesterday the agenda of the upcoming session at the Kremlin which the president’s press service has not announced yet. Sources of the Interfax news agency confirmed plans to hold the session and its agenda. The ministries related to the issues are reportedly preparing proposals on pricing policy in the gas industry for the next four years, such as raising gas prices for the next year for more than 15 percent. “We expect very important decisions,” an official told Interfax. A participant of the upcoming meeting in the Kremlin informed Kommersant that RAO UES is going to show the president its amended fuel balance for 2007 which does not run against Gazprom’s plans but brings down the share of gas in the total consumption, increasing shares of coal, nuclear energy and alternative types of energy.
Consumption of coal at RAO fell from 70 million metric tons in the 2002/2003 heating season to 20 million tons in 2006 and 2007. RAO’s amended forecast predicts consumption of 29 million tons of coal and some growth in black oil purchases.
Russia’s Economic Development and Trade Minister German Gref spoke at the International Energy Week in Moscow Tuesday describing the agenda of the coming meeting, even though he did not mention the event directly. The minister criticized tentative plans to raise gas prices by more than 15 percent but noted that gas consumption in Russia would go up 72 billion cu. meters by 2010. Consequently, “doubling of Gazprom’s investment program” sounds reasonable, he said. German Gref has been opposing a hike in gas prices for quite a while. Other economy-related ministers, on the contrary, favor initiatives of the Industry and Energy Ministry to raise energy prices and lift state regulation in relations between Gazprom and its consumers.
Last week in London, member of Gazprom’s board, Andrey Kruglov indirectly confirmed the anticipated approval of the gas giant’s new pricing strategy. “We will reach the mark of $75-80 per 1,000 cu. meters much faster than we planned,” Kruglov said to overseas investment bankers.
Anatoly Chubais’s company, however, is not going to give away benefits from the hike to Alexey Miller’s monopoly. Sources of Kommersant report that Gazprom and RAO’s investment programs are going to be considered separately to highlight which regions of generating units construction lack pipelines and offsets and which regions need to have transportation facilities of gas mains extended. The meeting will also discuss long-term contracts between RAO UES and Gazprom on five-year gas supplies which will determine not only the size of deliverings but also “pricing formulas”.
Gazprom’s plans to double investments from $12 billion this year to some $22 billion in 2007-2009 and reap more profits can be secured only by a substantial rise in domestic gas prices. Russia consumes two-thirds of gas that Gazprom extracts. Apparently, both Gazprom and RAO are interested in the expansion of the free sales sector and price hikes, so the deal in the Kremlin is most likely to be concluded.
Ekaterina Grishkovets, Natalya Grib and Dmitry Butrin
All the Article in Russian as of Nov. 01, 2006
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