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Russia won't develop shale gas for a decade

Conventional gas is much cheaper to produce, meaning the country will not explore its unconventional reserves for some time

Russia will not focus on developing shale gas within the next decade because its vast conventional reserves are much cheaper to produce, Gazprom said.

Elena Burmistrova, Gazprom's deputy director general of oil and gas products, said Russia's conventional gas resources rendered developing shale gas uneconomical. “We do have (shale gas) resources but we don't consider shale gas to be more attractive than conventional gas right now,” Burmistrova said. “In (North) America there has been a huge boom and shale gas appears to be the industry driver right now but according to our economic calculations we're not going to develop shale gas in Russia within the next five to 10 years.”

Russia's shale gas reserves are unknown but the country holds more than 20% of the world's conventional gas reserves. Russia's conventional natural gas stash stands at 44.6 trillion cubic metres (cm), Cedigaz data shows.

Gazprom's chief executive, Alexey Miller, has played down the potential impact of shale gas developing as an alternative source of supply in Europe. The Russian government has said it will study the country's potential shale gas resources.

Europe's dominant gas supplier has been losing its market share to Norway because the Scandinavian country has been more flexible with its pricing for sales volumes.

Last year Norway increased its pipeline gas exports to Europe by 14%, to 100bn cm, according to Cedigaz. Russia's fell by 3% to just over 200bn cm.

Statoil has been partially linking its liquefied natural gas (LNG) sales prices to the European spot market rather than selling the gas entirely on an oil-linked basis.

Potential LNG exports from the US could increase supply availability in Europe and put pressure on Gazprom to be more flexible with its pricing. Burmistrova said the company was open to discussing new pricing mechanisms with its buyers but was not prepared to offer Henry Hub- linked deals just yet. “I understand that the market has turned in a different direction,” she said said. “I'm not sure we can base our pricing mechanism on (US) volumes we are not certain about right now.”

 The US Department of Energy (DOE) has so far approved only one LNG export project to countries without free trade agreements. Cheniere's six-train Sabine Pass facility in Louisiana. Cheniere said in March it had signed a 20-year sales deal with Centrica, a UK-based utility company.

The DOE is considering a further 19 applications. 

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