Translated material
Conflict with interest
The Board of Directors of Gazprom supported the transition to a gas price formula from January 1, 2011
Gazprom continues to lobby for the transition from January 1, 2011 to pricing for industry according to a price formula based on the principle of equal profitability with exports. Yesterday, the company's board of directors, which is headed by First Deputy Prime Minister Viktor Zubkov, and the majority of seats on it are occupied by state representatives, approved management's proposals on the conditions and procedure for this transition. In addition, members of the council instructed the board to “continue working with federal executive authorities to prepare and submit to the Russian government a corresponding draft regulatory act.”For the population, Gazprom wants to maintain the current procedure for indexing gas prices. The government has adopted an accelerated growth schedule for residential consumers to gradually eliminate cross-subsidies. Now gas prices for the population are 6-30% lower than industrial prices, depending on the region, and only in the gas-producing Yamalo-Nenets Autonomous Okrug are they equal.
A Vremya Novostey source in one of the departments reported that another First Deputy Prime Minister, Igor Shuvalov, instructed the relevant ministries and departments to work on Gazprom’s proposals. However, the leading department is now not the Ministry of Energy, with which Gazprom has found a common language on this issue, but the Ministry of Economic Development, which until now has firmly defended the need to limit gas price indexation to 15% for the next two years. It is precisely this schedule of increases in domestic prices for industry, as is known, recorded in the government-approved forecast of socio-economic development for 2010-2012.
It should be noted that yesterday, at a meeting of the board of directors, only the head of the Ministry of Economic Development, Elvira Nabiullina, allowed herself to abstain from voting on the issue of domestic prices, citing a “conflict of interest.” Viktor Zubkov and Energy Minister Sergei Shmatko did not detect such a conflict and voted “for”, as did all other members of the council, including those who were absent - the head of Gazprom Alexey Miller (was in Kharkov), ex-minister Farit Gazizullin and two independents - Burkhardt Bergmann and Valery Musin. They supported management in the prescribed manner in writing.
The essence of Gazprom's proposals is as follows. The company considers it necessary to switch to determining gas prices for industrial consumers according to a formula from January 1, 2011. But in order to mitigate the consequences for the economy, the monopolist put forward the idea of a three-year transition period (until 2014). Next year, Gazprom is ready to apply a coefficient of 0.6 to the equal-income price, in 2012 - 0.7, and in 2013 - 0.9. It is now difficult to say how much gas will cost in Europe in a year, not to mention in the longer term. For example, if we take the average predicted price for this year - $325 per thousand cubic meters, then with a coefficient of 0.6 it will be about $120, or about $20 more expensive than the government indexation plan assumes. But the price of gas during periods of volatility in oil prices can fluctuate greatly from quarter to quarter, as it did last year. And if the price in Europe drops to $250, then next year Gazprom will have to forget about any growth in the domestic market. With a 40 percent discount, the formula price in regions bordering Belarus and Ukraine would be about $85 per thousand cubic meters. And already this year, enterprises in the capital region are paying Gazprom over $90.
However, the monopolist is not so simple and wants to insure itself against such surprises, citing the fact that the price on foreign markets tends not only to fall, but also to rise. So he suggests a corridor. In 2011, the price is determined by a formula with a coefficient of 0.6, but only within the established corridor. It should not be lower than in the current year, plus 15%, but cannot be higher than this year, by 20%. In practice this means the following. Gazprom guarantees itself a 15 percent growth in any case. But if the situation is good, he will be able to sell gas on the domestic market - at 1-5% more expensive than government forecasts. In 2012, the upper limit, according to the concern, should increase to 25%, and in 2013 - to 30%.
A source at Gazprom points out that on Tuesday the course towards equal profitability in the medium term was confirmed by Prime Minister Vladimir Putin, who spoke in the Duma, and sees this as a good sign for the concern’s initiative. “I have already said, in my opinion, even in this room: we cannot continue the practice in which the entire country is sitting on natural gas, like it’s on the hook,” said the head of government. “And we need to make prices equal for export and domestic consumption.”
At the same time, Vremya Novostey’s source in one of the relevant departments says that Gazprom is putting pressure on officials, but work on its proposals has not yet really begun. “The discussion on specific figures and conditions for the transition to a price formula lies ahead,” says the official. — And so far there is no reason to believe that the government will fully satisfy Gazprom’s wishes.