Gazprom sizes up US gas market

Gazprom, the Russian gas giant, is planning a coup on the US natural gas market as it plans to gain a 10 percent share within five to ten years, according to a top US executive.

Reuters reports that, if complete successfully, the share would amount to six billion cubic feet of gas per day, said John Hattenberger, president of Gazprom Marketing & Trading USA. Deals to increase existing supply are said to be signed shortly.

"We expect to sign another deal this week, with one or two to follow in two to three months," Hattenberger said.

Alexander Medvedev has even said that the state-run gas company's operations in the US market would follow the "organic growth route" that has seen Gazprom's business expand in other liberalised energy markets, such as the UK. "We are now following the same method in the US. We know how to work in fully liberalised markets," said Medvedev earlier this month.

US gas won't ruin plans

Gazprom has contracted to supply LNG to the US from its Sakhalin-2 plant, in Russia's far east, and could also send LNG to the country from the Shtokman field, in the Barents Sea, once it comes on stream. And Medvedev rejected notions that recent new discoveries of vast unconventional gas resources in the US would ruin prospects for LNG exporters to the country.

"There are many myths about shale production," he said. Production from shale gas needs continuous drilling to prevent output falling quickly, he said. Optimists had also failed to account for the environmental cost, including "heavy water use of the production process", he suggested.

Gazprom began trading and marketing in gas in the US at the start of October, with more than 350 mmcf of physical gas supply per day. Hattenberger highlighted that deals should be signed in the coming months that will increase existing supply in the US.

"Supply could easily become 500 mmcf per day and could be larger than that," said Hattenberger.

"The deals are with US companies who have strong gas positions in North America and have small or no gas positions in Western Europe which they would like to increase," he added.

Global expansion

Gazprom has big plans for global expansion, with plans to enter Brazil's LNG sector, after Medvedev announced at this World Gas Conference in Buenos Aires that the company were close to opening an office in Brazil that would run the company's operations in Latin America.

Gazprom is already working in the Venezuelan upstream, where its projects include a heavy-oil block in the country's Orinoco region.

LNG is expected to play a major role in Gazprom supply to the US in the long term, from the existing Sakhalin 2 project in Eastern Russia and the planned Shtokman project in the Arctic.

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