NationStates Jolt Archive

Gazprom Share Surge Takes Putin's Gas Company Past BP

Gazprom stock jumped 7.5 percent to a record $11.18 as of 3:50 p.m. in Moscow, after its weighting was raised sixfold in the MSCI Emerging Markets Index because Putin ended ownership curbs on the stock. That values Gazprom at $259 billion, making it the world's fourth-biggest publicly traded company, after Exxon Mobil Corp., General Electric Co. and Microsoft Corp.

The benchmark Russian Trading System Index of stocks more than doubled in the past year as energy prices soared to records, aiding an eight-year economic expansion in the world's largest oil and gas supplier. Putin used the cash generated by the boom to tighten control of the energy industry, including Gazprom, the world's biggest natural-gas company by output and reserves.

Putin is trying to build Gazprom into an international energy provider big enough to compete with Irving, Texas-based Exxon Mobil, whose $390 billion market value makes it the world's biggest.

Gazprom, which supplies a quarter of Europe's gas, wants to expand by buying stakes in retail companies delivering gas to consumers.

Gazprom, created out of the Soviet gas ministry in 1991, holds 16 percent of the world's known reserves. Its gas output of 547.2 billion cubic meters last year is equivalent to 9.42 million barrels of oil a day, about as much as the daily extraction last month in Saudi Arabia, the world's biggest oil supplier.

CEO Miller, who worked for Putin in their native St. Petersburg, has said he expects Gazprom to compete with Exxon Mobil and Saudi Arabia's Saudi Aramco to become the world's largest energy producer within four to five years.

Morgan Stanley today said it will increase Gazprom's weighting in the MSCI indexes as of June 1, after Putin last year lifted restrictions on trading Gazprom shares, allowing people who aren't Russian citizens to own more stock and trade the company's local shares.

Gazprom's weighting will be increased to 2.5 percent from the current 0.4 percent in the Emerging Markets index after the close of trading on May 31, the MSCI said in an e-mailed statement yesterday. The index is tracked by investors with more than $3 trillion under management.

Gazprom's market value may more than quadruple to as much as $1 trillion, Deputy Chief Executive Alexander Medvedev said yesterday. The company needs to consolidate full control of oil producer OAO Sibneft and stakes in power generation companies for this to happen, he said, without giving a timeframe.

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Much more, including political commentary, at http://www.bloomberg.com/apps/news?pid=10000102&sid=aHus4r_7qXBI&refer=uk


Those who do not adapt, become victims of globalisation.

I for one, am pleased at the irony that the nation synonymous with communism has so fully and mercilessly embraced the global economic model. It is the ultimate goal of every teacher to have a student equal or surpass his or her own achievements, and we are looking at such a historic example today. With global oil discoveries tailing off and global production flat but declining sharply in the West, Gazprom and the other Russian energy giants with which it could eventually merge, are guaranteed years, indeed decades of sky-high prices for their product, profits without precedent, and the political influence which necessarily accompanies indispensable status and wealth.

Russia's oil production alone is equal to Saudi Arabia's, monthly totals exceeding it on a regular basis. But Russia is also the undisputed leader in gas, both in share of global resources (up to a quarter of the world total near the city of my birth), and in production and transmission capacity - something which gas-flaring Saudi Arabia can never match.

And for a publicly-traded company which owns the gas, it makes sense to own the pipelines at transit and point of use. The funds available for acquisitions are as yet unknown, but in a world where ever-rising energy consumption drives demand beyond available supply (http://newsimg.bbc.co.uk/media/images/41439000/gif/_41439340_wholesale_gas_prices_416.gif), they may prove to be eye-watering.

I think you understand the shape of the future. (http://www.eogresources.com/investors/stats/USdecline_05.jpg) :)

Embrace it. (http://www.peakoil.net/OilGasUK.html)

And if not... well, keep trying to invent that magical new technology. ;)

Invoking the 24-hour bump rule...

After half a century of Cold War, I thought more people would be prepared to celebrate the victory of capitalism in the East. :(

I'm not sure I understand your point...

Invoking the 24-hour bump rule...

After half a century of Cold War, I thought more people would be prepared to celebrate the victory of capitalism in the East. :(
Methinks they're flummoxed at the thought of any 'victory of capitalism' that comes at their own eventual expense.

I think your post was too self-contained. You effectively argued both sides at the same time. I for one, read your post, nodded and moved on.

You're too good for your own good. :p

I think your post was too self-contained. You effectively argued both sides at the same time. I for one, read your post, nodded and moved on.

You're too good for your own good. :p
i agree. shallow and pedantic.

perhaps.

Invoking the 24-hour bump rule...

After half a century of Cold War, I thought more people would be prepared to celebrate the victory of capitalism in the East. :(
The Russians have often been idologcially wrong, but never stupid. I don't doubt that they have seen the handwriting on the wall, and being the good, intelligent students they are, have adopted a limited capitalism hook, line and sinker.

I suspect they will eventually outperform the Chinese, since the Russians seem to have the greater resources.

The Russians have often been idologcially wrong, but never stupid. I don't doubt that they have seen the handwriting on the wall, and being the good, intelligent students they are, have adopted a limited capitalism hook, line and sinker.

I suspect they will eventually outperform the Chinese, since the Russians seem to have the greater resources.

Either that or the nasty prospect of the two having a little protracted fight over them... :(

Invoking the 24-hour bump rule...

After half a century of Cold War, I thought more people would be prepared to celebrate the victory of capitalism in the East. :(

Sorry, I missed the post the first time around, so I will respond to the bump.

So, when do you think that the Republicans will start to think that Russia is now a threat again?

So, when do you think that the Republicans will start to think that Russia is now a threat again?

When Putin next comes to the White House, accidentally steps on the wrong blade of grass and Bush calls him a "Horticultural Terrorist" is so such crap...

The Russians have often been idologcially wrong, but never stupid. I don't doubt that they have seen the handwriting on the wall, and being the good, intelligent students they are, have adopted a limited capitalism hook, line and sinker.

I suspect they will eventually outperform the Chinese, since the Russians seem to have the greater resources.
They would need to start boning like crazy in order to do so.

Methinks moving to Russia may be a plan in the future.

I think your post was too self-contained. You effectively argued both sides at the same time. I for one, read your post, nodded and moved on.

You're too good for your own good. :p

LOL.

Ditto man, I was thinking the exact same thing.

I don't see Russia and China ever having hostilities. The fact is, China is a great customer. It is willing to sign long-term contracts for any energy it can get its hands on, and it is prepared to pay serious cash. Similarly, it buys a lot of military technology from Russia.

The post is self-contained, yes, but this is a complex issue and no-one would be doing it any justice by adopting just one argument. Hence the balance. Too good to be popular, LOL. :headbang: :p

Indeed, this is a further case-study in globalisation's sense of irony, its ability to grow beyond the influence of its founders and bite them on the arse. It also demonstrates an important point, that many of the large industrialised economically-developing nations are capable of learning the "rules of the game", and producing master strategists and tacticians. In the case of Russia, it is no surprise that the country which has produced one of the financially slickest organised criminal societies in the world, is getting to grips with the international financial system legally and exploiting both its strengths and its counterparts' weaknesses.

This does fit into the world energy situation quite nicely. A commendable success, and yet given the current environment, a cautionary tale of unintended consequences.

I don't see Russia and China ever having hostilities. The fact is, China is a great customer. It is willing to sign long-term contracts for any energy it can get its hands on, and it is prepared to pay serious cash. Similarly, it buys a lot of military technology from Russia.

The post is self-contained, yes, but this is a complex issue and no-one would be doing it any justice by adopting just one argument. Hence the balance. Too good to be popular, LOL. :headbang: :p

Indeed, this is a further case-study in globalisation's sense of irony, its ability to grow beyond the influence of its founders and bite them on the arse. It also demonstrates an important point, that many of the large industrialised economically-developing nations are capable of learning the "rules of the game", and producing master strategists and tacticians. In the case of Russia, it is no surprise that the country which has produced one of the financially slickest organised criminal societies in the world, is getting to grips with the international financial system legally and exploiting both its strengths and its counterparts' weaknesses.

This does fit into the world energy situation quite nicely. A commendable success, and yet given the current environment, a cautionary tale of unintended consequences.
Again, you make yourself hard reply to. You just want to say "I agree" and read what else you think about the subject.

Again, you make yourself hard reply to. You just want to say "I agree" and read what else you think about the subject.

Yeah, TG and a few other posters (such as the now defunct Niccoli Medici) had this annoying trait :p

Again, you make yourself hard reply to. You just want to say "I agree" and read what else you think about the subject.
Damn him and his penchant for being well-spoken.

LOL, where's the blushing smiley when you need it? :fluffle:

That's the way the world works, I guess. Russia's got a bit of a problem though; all of their economic growth is dependent on energy and they are not efficient at using it...that means high gas prices can hurt them as much as it helps their producers. It's pretty much undisputed that Gazprom is a classic example of capitalism in action, for good or for worse.

Thankfully, the US has more options to avoid dependence on natural gas than Europe; we can both conserve more and use alternatives for power generation that aren't available in Europe. However, we're going to have to deal with higher prices and more volatility than any time in the past; thankfully, however, US natural gas demand is actually still negative compared to its peak in 2000. Even better, the places that need it the most also have the most opportunities to replace it...but that still takes a while to make the transition.

I still recall, quite ironically, the natural gas lobby's claims that natural gas would be the cheap, clean fuel of choice for decades...now, we're doing whatever we can to stop using it because it's going to cost us. Honestly, I think removing ourselves from natural gas is even more urgent than oil.

I wonder if Gazprom's success is a result of a different attitude to buisness. The goal of most buisnesses is to generate a profit, but could Gazprom's goal be to embarass the competion (ie the Capitolists)? Beating the Capitolists at their own game would be a great way to spite them, then enjoy a fair bit of profit afterwords.

Honestly, I think removing ourselves from natural gas is even more urgent than oil.
That is certainly true of the US and UK, which both have high dependencies and massive domestic natural gas decline rates. While global oil production should fall at a rate of 3%, North Sea gas is looking at more like 10% and new US well completions at 30% - with little in the way of a global market due to a shortage of transport infrastructure. One of Bush's energy advisors, Matthew R Simmons, has for years been saying that the natural gas situation has been overlooked and actually has the potential to be far more disruptive in the medium term.

I wonder if Gazprom's success is a result of a different attitude to buisness. The goal of most buisnesses is to generate a profit, but could Gazprom's goal be to embarass the competion (ie the Capitolists)? Beating the Capitolists at their own game would be a great way to spite them, then enjoy a fair bit of profit afterwords.
Actually I think they realise that when you have some of the biggest reserves and production capacity in the world, and it depends on your commodity for its survival, you would be a fool not to see the opportunity for what it is - a license to print money for 20+ years. I think that's what it comes down to, especially their future mergers and acquisitions policy, positioning themselves in the market in such as way that they are indispensable and the world could not manage without them.

That is certainly true of the US and UK, which both have high dependencies and massive domestic natural gas decline rates. While global oil production should fall at a rate of 3%, North Sea gas is looking at more like 10% and new US well completions at 30% - with little in the way of a global market due to a shortage of transport infrastructure. One of Bush's energy advisors, Matthew R Simmons, has for years been saying that the natural gas situation has been overlooked and actually has the potential to be far more disruptive in the medium term.

Natural gas is, after all, a major source of power generation. If gasoline is expensive, people and businesses can find alternative means of transportation and can use quite a bit less, and you could use electronic means of communication in place of physical commute. But if the lights go out, you can't really telecommute or communicate in general...power generation is the biggest liability in the natural gas market.

I think natural gas consumption could be drastically reduced, but that does take time. Energy efficiency improvments take a while, as do alternative sources of energy. The only immediate way to reduce it is to use less, and that either requires people to heat their homes less or to reduce power consumption...and that's going to take prolonged periods of high prices to do.

Actually, an artificial supply crunch might do very well to help achieve that goal, so perhaps the increased influence of Gazprom might be beneficial in that regard.

And you know politicians are concerned when Bush is discussing increasing the CAFE standards on cars and SUVs...

Actually I think they realise that when you have some of the biggest reserves and production capacity in the world, and it depends on your commodity for its survival, you would be a fool not to see the opportunity for what it is - a license to print money for 20+ years. I think that's what it comes down to, especially their future mergers and acquisitions policy, positioning themselves in the market in such as way that they are indispensable and the world could not manage without them.

Don't forget that Gazprom alone accounts for 25% of Russia's tax revenues and 8% of GDP...high gas prices mean more tax income and more economic growth, and those mean more influence around the world.

Strategic planners should be very concerned that Iran and Russia have the world's largest reserves of gas; even if world production wern't to peak for a thousand years, that still means these two nations will be the dominant producers of the stuff and that makes us dependent on them...the faster we get off of natural gas or find alternative means of producing it, the better.

All I want to know is who came up with the genius plan of powering the UK with natural gas instead of nuclear...that's really bad since the North Sea is pretty much in permanent decline.

Yeah, the only demand destruction in the natural gas market are fertiliser plants and operators of industrial furnaces. In fact, because of the difficulty in relighting domestic gas boilers, in the UK the power stations would have their gas supply disconnected before any domestic customers (who are the last on the list). So people would still have gas central heating and cookers when the electricity goes. That's not a very elastic market.

All I want to know is who came up with the genius plan of powering the UK with natural gas instead of nuclear...that's really bad since the North Sea is pretty much in permanent decline.
As usual, we have the Thatcher government to thank for that. Construction of CCGTs followed on from the closure of the domestic coal mining industry and the violent break-up of union protests. We still generate 30% of our electricity from coal-fired thermal, but the coal is shipped from South Africa. I believe the last British coal mine closed last year.

Yeah, the only demand destruction in the natural gas market are fertiliser plants and operators of industrial furnaces. In fact, because of the difficulty in relighting domestic gas boilers, in the UK the power stations would have their gas supply disconnected before any domestic customers (who are the last on the list). So people would still have gas central heating and cookers when the electricity goes. That's not a very elastic market.

The US is a bit luckier in that regard; just lowering our thermostats 2 degrees Fahrenheit in the winter would reduce natural gas consumption by 8%, since the biggest consumer is residential heating. Our demand is also flat to negative, which means we'll be able to deal with supply cutoffs somewhat better.

We can also do the same with industrial and fertilizer plants; it's also possible that alternative methods of fertilizer production are going to become large scale in the near future due to their now economical nature. Utilities usually get their gas first, so they wouldn't go off unless everything went to hell, and I don't think that'll happen, especially with out giant amount of coal available.

Natural gas is probably the least elastic product of the energy sector, even with the opportunities for demand destruction in the US. However, I think solar heating and alternative energy will be able to take over the need for natural gas as distributed generation networks are established...California's a leader in that regard, but is also heavily dependent on natural gas.

And as long as the power is on, we can use space heaters...that would probably save more natural gas than all others combined. I think there is room for demand destruction in the US, but then again the globalized nature of the market means savings here don't necessarily translate in to lower prices due to the demand worldwide.

As usual, we have the Thatcher government to thank for that. Construction of CCGTs followed on from the closure of the domestic coal mining industry and the violent break-up of union protests. We still generate 30% of our electricity from coal-fired thermal, but the coal is shipped from South Africa. I believe the last British coal mine closed last year.

We have the Clinton administration to thank for our rapid rise in natural gas power and consumption; as much as I liked his other policies, Clinton failed miserably when it came to energy policy. We made literally zero progress in almost all aspects of renewable energy and efficiency...and that has played a huge role in today's energy prices.

The 1990s were the decade of the SUV too. Madness. :(

The 1990s were the decade of the SUV too. Madness. :(

This says it all:

http://www.teresco.org/pics/florida-19981230-19990102/disk1/mvc-005f.jpg

That's 79 cents per gallon...madness. Those prices we paid in 1998 were cheaper than at any other time in the history of the oil industry in real terms.

Really explains why prices are high now; there's a saying among commodity traders that it "takes low prices to cure low prices" (and vice versa) and I think the indulgence of cheap gas and oil in the 1990's is going to cause us pain now.