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Russia in Denial over Shale Boom

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The CEO of Gazprom, Russia’s state-owned gas monopoly, doesn’t think much of the shale boom. In a recent interview with RT, he seemed downright dismissive of the new supply of natural gas, insisting that Russia won’t need to pursue unconventional gas reserves (read: shale) until next century.

The interviewer asked CEO Aleksandr Medvedev about Gazprom’s relationship with its customers after its recent “gas wars” with Ukraine, in which the Russian company twice cut off gas supplies midwinter to the former Soviet country. Medvedev was defiant: “You should easily check our reputation with our partners, the leading off-takers of Russian gas or small customers in European countries. I am 100% sure that you will not hear any complaints about us from the people who are involved in the business.”

It’s hard to imagine that many European countries are content with their current arrangements with Gazprom. The Russian behemoth has set up long-term contracts that frequently charge countries for a fixed amount of gas, whether the country actually imports that amount or not. Shale has given countries like Ukraine, Poland, and Lithuania hopes that they can wean their dependence on Russian gas.

Still, countries are having trouble replicating America’s success with the new sources of natural gas. Complex geologies and bureaucracies, as well as a lack of technical expertise and access to capital, have stymied the global spread of shale.

The price for natural gas is still due to come down, especially if and when the US permits exports of its outsized shale reserves. That spells trouble for Gazprom. For the company’s leaders, simply sticking their heads in the sand isn’t much of a solution. Medvedev would do well to direct his gas company to start investing in Russian shale reserves—the eighth largest in the world.

[Oil rig image courtesy of Shutterstock]

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  • bigfire

    One thing still in Russia’s favor (for now) is their undisputed proximity to their primary customer (Europe). It’s still not practical to ship natural gas long distant, compressed or otherwise with anything other than pipeline. But with many other gas project coming online (Israel for example), alternative source of Gas is coming.

    • Atanu Maulik

      A VAST amount of oil and gas is about to hit the market. Putin’s dreams of a resurrected Russian empire is going to drown in it.

  • Atanu Maulik

    Denial. The first stage of grief.

  • Tom Servo

    The problem that all of these countries have is that in order to have an American style oil shale boom, you need to have American style rights of property ownership, and an American style oil and gas infrastructure composed of thousands of individual companies and tens of thousands of investors all working and competing to achieve the greatest, most efficient level of production.

    This is why China and Russia, especially, will find it nearly impossible to recreate America’s success in this area.

  • nickshaw

    I’m sorry, we’re giving Russia advice why, again?
    Europe will only get out from under the Russian gas boot when they give up the “green” nonsense and start drilling in earnest.
    The Ukraine just needs to change it’s system entirely. It probably has huge reserves but, who will risk major investment there?

  • Jacksonian_Libertarian

    Fracking is expensive, and Russian gas is still available the cheap way of just drilling a hole in the ground. So what economic reason do the Russians have for developing their oil shale? None!
    Russian gas will always be cheaper than American gas in Europe, especially since American gas must be liquefied and shipped, while Russian gas is piped. Medvedev is quite right to do what is most profitable, and when it becomes profitable to develop Russian shale reserves, they will still be there and the technology will have matured and become more efficient.

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