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]