The writing is on the wall for Gazprom's long-held monopoly over Russia's gas business. State-owned oil major Rosneft fired the latest volley in the growing assault on the gas giant's priviledged position by calling for an end to Gazprom's export monopoly on liquefied natural gas (LNG) on February 13.
Rosneft chief Igor Sechin called on the Russian government to liberalise exports of LNG from offshore projects by ending Gazprom's monopoly of foreign gas sales. "Such volumes cannot be sold on the domestic market and so we are asking the government to consider liberalising gas exports, in particular, liquefied gas," Sechin told the presidential commission for development of the fuel and energy sector, reported Ria Novosti.
The government is clearly revving up to allow other companies to export gas - albeit only as LNG for the time being. The government is to due to consider granting leading independent gas producer Novatek an LNG export license this month.
Gazprom has found itself in increasingly dire straits. The advent of shale gas and growing volumes of LNG trade on spot markets - which can be transported by ship so breaking the age-old dependence on geopolitical pipeline routes - means the cost of gas is tumbling.
"Momentum toward North American energy independence accelerated last year well beyond the wildest dreams of any energy analyst and well above the forecast we made in our first Citi GPS report, 'Energy 2020: North America, the New Middle East?'," Citi said in a report this week.
The upshot is that Gazprom has been forced to hand out billions of dollars of rebates to European countries (not Ukraine, though) in 2012 and will be forced to do the same again this year.
Gazprom has long held a sacrosanct position in Russia's state-owned corporate firmament. Russian President Vladimir Putin said explicitly at the company's tenth birthday party several years ago that the company remains an "explicit tool of foreign policy." But as its economic clout wanes, so does its political usefulness.
With the economy stagnating, the Kremlin is on the hunt for revenues and increasingly it no longer feels it can afford to turn a blind eye to Gazprom's profligacy, corruption and below-par productivity. Accounting for 8% of GDP by itself, the company it is simply becoming too expensive to ignore these problems.
The Kremlin seems to be headed towards a policy already thrashed out in the banking sector: rather than outright privatisation (which is impossible both de jura and also in practice, as the company is simply too big to sell), the state is going to set up state-owned competitors to force Gazprom's management to focus more on the numbers. It's a hybrid model where competition between state-owned companies provides the goad - in the bank sector Sberbank and VTB Bank - but the state retains control of the sector by owning the main players. In the longer term, the state will then gradually sell stakes to private investors, although whether this stake falls below a controlling or blocking stake will be decided on a case-by-case basis.
The situation in the gas business is likely to be even more progressive than in banking, as Novatek, a privately owned company, is set to win a leading role and is clearly being groomed to become Russia's LNG champion - an unusual willingness on the Kremlin's part to allow a private company to command such a crucial product as energy.
At the same time, Rosneft is being prepped for a bigger role in the sector: to play VTB to Gazprom's Sberbank. It has been given gasfields and looks set to win a big chunk of the 40%-odd of Gazprom's long-term domestic commercial supply contracts that come up for renewal this year.
All of this might be a preliminary to breaking up Gazprom (although no one has mentioned this yet) into GazVneshProm (Gazprom International) and GazRosProm (Gazprom Russia), which are clearly too different businesses anyway.
But that is a long way out - if it comes at all. Under existing legislation, energy giant Gazprom has a monopoly on gas exports and other producer companies are obliged to sign export contracts with Gazprom structures.
Sechin said LNG market liberalisation would not immediately affect Gazprom because Russian LNG exports in the near future are primarily destined for emerging markets (such as Asia Pacific nations), and not Gazprom's existing customers in Europe. Russia and Japan signed a $7bn LNG deal in September 2012 for gas supplies from an LNG plant near the Pacific port of Vladivostok.
But Gazprom is clearly in rear-guard defence mode. It was already forced to concede a bigger share in a JV with Novatek to produce LNG in January. And last week it said it might allow greater access to the domestic gas transport system and give take-or-pay rights that would allow domestic independent producers to collect money from their clients, as well as greater access to the pipeline network at home. The regulations underpinning these changes could be finalised in 2015, reports the Russian press.
Jason Corcoran in Moscow - Russian banks are disappearing at the fastest rate ever as the country's deepening recession makes it easier for the central bank to expose money laundering, dodgy lending ... more
bne IntelliNews - The Kremlin supported by national sports authorities has brushed aside "groundless" allegations of a mass doping scam involving Russian athletes after the World Anti-Doping Agency ... more
Jason Corcoran in Moscow - Revelations and mysticism may have been the stock-in-trade of Nikolai Tsvetkov’s management style, but ultimately they didn’t help him to hold on to his ... more