When Gazprom last month finally launched its new flagship project, the Bovanenkovo gasfield far above the Arctic Circle, it should have been a triumphant moment: the field contains enough gas to supply Europe’s needs for decades to come.
But instead, the launch of the field – after years of delays and more than $44bn in capital expenditure – was overshadowed by a warning as Vladimir Putin called on the state gas company to pay more attention to the shale gas boom in the United States.
The shale revolution that is revolutionising global gas markets is also threatening to undermine Gazprom’s export position in Europe, where it accounts for 25 per cent of gas sales, and to relegate projects like Bovanenkovo to relics of the past.
“Politicians, experts and businesses are talking about a real shale revolution,” Mr Putin said. “We are simply obligated to take these trends into consideration, to clearly imagine how the situation will develop not just in the next two to three years, but throughout the coming decade.”
After years of denial about the importance of shale, Gazprom is coming under increasing fire as it faces growing competition in global markets and a European Commission antitrust probe. At home, too, it is facing the rise of Rosneft, which snapped up a big new domestic supply contract soon after agreeing to buy TNK-BP in a transformative $55bn deal.
The shale gas boom in the United States and the arrival of new supplies of liquefied natural gas to Europe are posing the biggest threat to Gazprom since its creation in 1989 as a state monopoly carved out of the Soviet Ministry of Gas.
To make matters worse, its export revenues are predicated on long-term contracts that peg the amount its European customers must pay to the price of oil. But alternative supplies, which are sold at cheaper “spot” prices, are threatening this business model – all at a time when it is making record investments.