Exchange news, gas. Since 2006 gas market of the Russian Federation has started developing rapidly, making orientation to the principles of market economy. It is at that time that Russian government understood that oil and gas industry is the outpost of economy.
For the last 5 years gas policy has undergone considerable change, which certainly proves that certain strategies are implemented within the country and beyond its borders. How is this expressed and what shall investors expect?
What is gas market of Russian Federation moving to?
The year of 2007 has been remarkable for Russia due to Decree No. 333, which introduced liberal terms of price formation in gas industry. Gazprom was allowed to sell gas at different price to different clients, in other words, by agreement, although such actions of Gazprom undergo the regulation of a special institution – FTS (Federal Tariff Service). In 2011, for example, the institution set the maximal price range at the point of 10%.
■ transition. Since December 31, 2010 gas industry of Russia is regulated by the new Decree No. 1205. This document assigns the period of 2011-2014 as transitional. Consequently, except price for population, a special formula will be applied when defining the price for Gazprom clients;
■ formula of Russian gas. Using the state approved formula will make it possible to earn equal profit from the volume of gas sold at internal and at external markets till 2014. For this purpose special coefficients have been set by the Federal Tariff Service. Being the key point of the formula, they will influence the price. The price is to correspond to the average parameters of the RF, which are defined on the basis of wholesale gas prices for all clients of Gazprom, except the population of RF;
■gas coefficients. In addition to price policy regulation, FTS will set special coefficients that will provide different gas price for every region of Russia. Consequently, gas price in the regions may vary from - 3 to +3. This percentage depends on the average gas price that has been historically set in a certain region.
■ movement to the market. The main task of Decree No. 1205 is a transition in 2015 from state methods of regulating wholesale gas price to state methods of regulating tariffs on gas transportation, which is performed by main gas pipelines exclusively in the territory of RF.
Such transition is supposed to eventually provide conditions when domestic gas price in RF will be formed following the rules of the market. Resulting from this, internal market of RF will form the basis of gas industry in Russia, as well as all industries, the development of which is stipulated by gas industry. The country’s а energy strategy will become more effective.
Such plans of Gazprom prove that Russian market is of top priority for the company, although it is considering increasing gas supplies to Europe and Asia.
For investors: what is the peculiarity of natural gas as a type of goods at global market?
Gas is a commodity of high global demand, as everybody needs fuel. However, difficult transportation and recovery make it a unique type of goods. Some of its peculiarities have been analyzed by the experts of Forex Academy and Masterforex-V Trading System :
■price range. Today natural gas is a product, for which price may be 3 or 4 times more or less in various countries of Europe, Asia, and the USA. Natural gas is a basis of economy in Russian Federation. Taking into consideration the abovementioned Decrees, the government of RF foresees that gas market will undergo transformation and will work by absolutely different laws in several years. These changes will encourage various revolutionary trends, which are developing and will keep developing at the market;
■ new technology. Very soon gas may be recovered from shales; therefore, gas recovery will become independent from oil recovery and will have no influence on oil stocks. Such rocks usually have little natural gas, but if to involve large areas, big volumes of gas can be recovered. But will shales truly become a worthy alternative?
■tendencies of development. As explained by the analysts of the Department of Derivatives Trading within , stocks of natural gas are 20% higher than last year’s volume, although last year has been record according to the volume of stocks. At present there is a descending seasonal trend of gas price, which is related to the previous peak of demand for the product. The down trend is likely to continue due to record volume of stocks and descending seasonal trend:
Shale gas – is it real on a global scale?
Till 2003 nobody would have ever thought of recovering gas from shales. It was at that time that the government announced that gas crisis was coming close to the USA.
■ global stocks of shales. 8 years have passed since then, and the USA has moved forward a lot, having formed considerable gas stocks. This was first of all achieved due to development of modern technologies that are used for geological survey. The USA has set an example to other countries, as research on shale gas has shown that its global stocks are abundant and that new technologies will considerable reduce their price. Great Britain, for example, will have enough shale gas for the next 60 years;
■transportation technology. Another factor, which has impact on gas price policy, concerns modern technologies that enable gas liquefaction. Consequently, transportation of liquefied gas is rather cheaper and can be done anywhere on the globe. Since 2002 over 40 counties have started using technologies for gas liquefaction. As a result, main gas pipelines and expenditures on their creation are not topical are not carries any more. Long-term agreements are not to be concluded as a result of such gas market actions. Gas price will be independent from oil price for the countries that implement such technologies.
What actions are to be taken in order to earn from changes at the market?
Any modern investor understands that all these changes certainly show that the companies working on development and implementation of such technologies are to receive investments.
■ examples for investments. Sasol company in South Africa can set an example. It recovers the highest volume of shale gas in RSA. The company is also working on building a plant that would produce oil and gas (the plant is being built in Louisiana). Australian company Woodside Petroleum also is rather perspective because it is selling liquefied gas to Asian market;
■conservativeness of Gazprom. Speaking about Russia, Gazprom is neglecting modern global tendencies by paying no attention to modernization of price policy. Main gas pipelines and long-term contracts remain the major principles of its work. Nevertheless, the company keeps receiving investments;
■ Japanese investments. Last December HR changes have touched Gazprom. At the same time Vladimir Putin ordered to check the company for corruption schemes at the company. However, Japanese bankers have decided to invest 800 mln. dollars into Gazprom. Such actions are explained by the fact that today Europe is facing crisis and unstable situation, as well as rising amount of purchased gas. Consequently, investment into Gazprom is supposed to provide stability for such banks as Bank of Tokyo – Mitsubishi UFJ, Sumitomo Mitsui Banking Corporation, and Mizuho Bank.
Judging from the abovementioned, investments into gas industry are rather perspective regardless of chosen technology. One simply needs to have a correct approach to the matter and invest money into a descent company at the right time.
“Market Leader” and Masterforex-V Trading Academy hold a questionnaire in forum for traders and investors: in your opinion, is such large-scale project as Nord Stream attractive in terms of investment?
- certainly, gas is our future, and Russia will remain its largest supplier;
- no, the project is too expensive and involves high risk;
- no, main gas pipelines are our past.
