"Ninth decimal place"

Talk about gas shortages should force the government to raise gas prices

Minister of Industry and Energy Viktor Khristenko admitted that there is still no final government decision on liberalizing gas prices and switching to a system of long-term contracts. There is only a regulatory decision on a 15 percent price indexation in 2007, he said at a briefing last Friday. In order to consolidate the program that the Cabinet of Ministers outlined in the gas sector on November 30 - a clear schedule for price increases with the liberalization of the industrial consumption market in 2011, as well as the transition to a system of long-term contracts for gas supply, - according to Mr. Khristenko , it is necessary to adopt at least two government resolutions and sign these agreements between gas suppliers and consumers. However, neither one nor the other can be done so far.

According to Vremya Novostey, the draft resolutions exist in draft form and with a large number of fundamental disagreements, and the contractual campaign, which in the electricity sector should have ended by April 1, has not yet begun. It was not possible to develop a coherent system for reforming relations in the gas industry in three months without encroaching on the sovereignty of Gazprom. Now only the gas shortage factor can force the government and the leadership of the country as a whole to implement the decisions outlined last fall. “I have an understanding that the problem of a shortage or some threat of a shortage is good only from a psychological point of view - so that the actions that were planned are carried out. It doesn’t have anything else besides a psychological nature,” noted Mr. Khristenko.

As is known, on November 30, the government, after numerous working meetings in the White House, in the presidential administration and directly with President Vladimir Putin, generally approved the proposals of the Ministry of Industry and Energy to adopt a schedule for increasing regulated gas prices for the next four years with the abolition of regulation for industrial consumers from 2011. By this time, all enterprises should receive gas under long-term contracts with a price formula that ensures equal profitability of domestic and export supplies of fuel suppliers.

The Federal Tariff Service was instructed to prepare a draft resolution on the price formula and indexation schedule before it comes into force, and the Ministry of Economic Development was tasked with preparing a document on long-term contracts and a new gas supply system. Vremya Novostey's sources in the relevant departments claim that neither one nor the other has been officially included in the government and is stuck at the level of coordination between ministries, services and the government apparatus. One of the contradictions is related to the planned liberalization of gas prices and at the same time the preservation of a completely monopoly market, which is regulated largely not by government agencies, but by the largest player, Gazprom. The Ministry of Economic Development and the FAS actively object to this. The second contradiction is the presence in long-term contracts of a “take or pay” clause without the possibility of free resale of the volume not selected for one reason or another. Many consumers cannot do this. There are also questions regarding the regulation of prices for the “new” volume of gas (above the limit for 2007) - Gazprom is demanding permission to supply this gas at free prices now.

But there is complete agreement regarding the content of the price formula. The main goal is declared to be “equal profitability” of supplies to the domestic market and for export. Although there is no economic sense, other than increasing the income of suppliers, in this approach. Since prices will be formed not on the basis of competition between different types of fuel within Russia, but on the mythical price in Europe. Mythical because prices even for Russian gas under various Gazprom contracts may not correspond to each other at all. It is believed that in each case, its own complex price formula is applied, tied to the price of a basket of petroleum products on the market of that particular country.

Mr. Khristenko, answering Vremya Novostey’s question about why Russia, when trying to build a market, is initially focusing not on energy competition, but on the need to increase Gazprom’s income in the domestic market to European levels, said that there is a different approach now no: “This is not so significant compared to other problems associated with working on long-term contracts - the ninth decimal place (such a small amount of growth in Gazprom’s income - Ed. ), believe me.”

Alexey GRIVACHS