Translated material
“Not subject to revision”
Alexey Miller reported to Vladimir Putin on new prices for Central Asian gas
The consequences of the collusion between Turkmenistan, Uzbekistan and Kazakhstan regarding the prices of gas purchased by Russia (see Vremya Novostey, March 14) interested Vladimir Putin. Last Friday, the head of state asked Gazprom Chairman of the Board Alexei Miller, who had been invited to the Kremlin to report, to report on the details of the situation. During the conversation, important statements were made for gas consumers in the CIS. Firstly, Moscow will not bargain with suppliers from Central Asia (for example, ask for a delay in the introduction of European pricing) and is ready to purchase gas according to a price formula tied to the European market. Secondly, the fact that the statement of partners from Ashgabat, Tashkent and Astana about their intentions to raise prices from next year was made now, and not at the end of the year, when the conversation about the conditions for future supplies traditionally begins, Gazprom is quite happy with - there is time for negotiations with Ukraine, which is the consumer of almost the entire volume of gas purchased by the Russian concern in Central Asia, also on the transition to European pricing.As already reported, on March 11 , the heads of Turkmengaz, Uzbekneftegaz and Kazmunaygaz, who sell the Russian concern a total of about 58-60 billion cubic meters of gas per year, came to Gazprom . And they told Mr. Miller that from January 1, 2009, they are ready to sell gas at European-level prices (tied to the prices at which Gazprom exports gas to non-CIS countries, minus transportation costs).
When asked by Vladimir Putin what this means for Gazprom, Alexey Miller replied: “This means that the price of gas that Gazprom buys on its balance sheet will increase significantly. This puts Gazprom in a difficult situation, since Gazprom buys gas both on its own balance sheet and for sale on foreign markets.” At the same time, the head of the corporation said that he treats this situation “with understanding,” “since we ourselves see how dramatic the dynamics of hydrocarbon prices are for consumers.” According to him, in its forecasts for 2008, the concern set a price of $310 per thousand cubic meters in European markets. “Right now the price in Europe has already exceeded $370,” Mr. Miller said. “At the same time, we believe that the average gas price in 2008 may be $378, and may even reach $400 per thousand cubic meters.”
If we take this price as a guideline for calculating the Central Asian rate, then it is easy to calculate: minus transit costs (at current tariffs) on the border of Russia and Kazakhstan, one thousand cubic meters will cost Gazprom no less than $350. And, accordingly, with delivery to Ukraine and the margin of the intermediary (represented by Gazprom) will cost Kyiv at least 370-380 dollars per thousand cubic meters. That is exactly twice as expensive as it is now.
“Ukraine has traditionally been an importer of Central Asian gas,” Mr. Miller told the president. - And, of course, if we talk about raising the issue on the part of traditional suppliers - on the part of the Central Asian republics, then we believe that this issue was raised for consumers of Central Asian gas in a very timely manner. When drawing up appropriate budget forecasts and forming the budget for the next year, the consumer must take into account the price dynamics that actually develop in the global and European gas markets.”
In conclusion of the Central Asian topic, Vladimir Putin asked the head of Gazprom two questions: is the position of the Central Asian partners final and when does Alexey Miller intend to begin negotiations with consumers from the CIS countries? “The position of our Central Asian partners is final and cannot be revised. This position was stated during our negotiations,” said the head of Gazprom. “As for our consumers in the CIS countries, we plan to begin negotiations immediately, because the transition to market pricing will require a fairly serious dialogue.”
While the Russian president listened to Mr. Miller's report, the main Central Asian gas seller, Turkmenistan's leader Gurbanguly Berdymukhamedov, held a meeting at which he declared Ashgabat's strong commitment to a “multiple approach to gas exports. -- Ed. ), which is of a purely pragmatic nature." “Concrete steps are already being taken to lay gas pipelines to China, along the Caspian coast, through Afghanistan and Pakistan to India. The Trans-Caspian route has not been removed from the agenda, Mr. Berdimuhamedov noted. “Turkmenistan is ready to cooperate at a new level, dictated by the global situation.” Thus, in the best traditions of Eastern diplomacy, he hints to Moscow that there is no point in resisting the transition to European prices, although today (after Iran’s refusal to purchase fuel from Ashgabat at higher prices) Gazprom is the only buyer of Turkmen gas.
A new audit of the reserves of large gas and oil fields in Turkmenistan will be carried out by the British company Gaffney Cline, the country's President Gurbanguly Berdimuhamedov said. The American DeGoyler also participated in the tender, but “as a result of negotiations, preference was given to the English company.” As the website Turkmenistan.ru reports, in 2004 Gaffney Cline already assessed the reserves of a number of gas fields in Central and Eastern Turkmenistan. However, the results of the work were never made public. According to Mr. Berdimuhamedov, the first stage involves an audit by the English partners at the largest gas field, South Yolotan-Osman.