June 30, 2017 / 4:59 PM / 4 months ago

Russia's Rosneft set for global gas tussle with Gazprom

MOSCOW (Reuters) - Russia’s Rosneft (ROSN.MM), the world’s top listed oil producer, wants to supply gas in parts of Europe where Gazprom is not present to avoid the risk of losing those markets to U.S. liquefied natural gas (LNG), a Rosneft executive said.

A logo of Russian state oil firm Rosneft is seen at its office in Moscow, October 18, 2012. REUTERS/Maxim Shemetov/File Photo

Gazprom, the leading global gas producer, enjoys monopoly rights on gas pipeline exports from Russia. It has lost its exclusive rights to ship seaborne LNG overseas to Rosneft and Novatek (NVTK.MM), Russia’s largest non-state gas producer.

Rosneft, headed by Igor Sechin, an ally of President Vladimir Putin, has long been vying for pipeline gas exports as it strives to grow globally. It has a memorandum with BP (BP.L), which owns a 19.75 stake in the Russian company, to trade up to 20 billion cubic metres (bcm) of gas annually in Europe.

Rosneft Vice President Vlada Rusakova, a former Gazprom executive, said the company wants to conduct “an experiment” in supplying gas to new markets in coordination with Gazprom.

“We are not counting on a total lifting of export restrictions. This would be harmful for Gazprom, especially against the background of a difficult financial and economic situation at the company,” she said in emailed comments.

She said as part of the experiment, Rosneft could supply gas to markets where Gazprom is not present and where U.S. LNG could be imported. Rusakova did not identify any such European countries.

“Of course, this should be done in close coordination with Gazprom, in order to avoid competition between Russian gas suppliers.”

Gazprom is targeting $32 billion to $34 billion in revenue from exporting more than 180 bcm to Europe and Turkey this year. Rosneft produced almost 70 bcm of gas last year, earning 208 billion roubles (2.71 billion pounds) from gas sales at home.

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The logo of Russian gas giant Gazprom is seen on a board in St. Petersburg, Russia, June 1, 2017. REUTERS/Sergei Karpukhin

Rosneft, like Novatek, is winning some of Gazprom’s clients at home thanks to a more flexible gas pricing policy. It is also eyeing Asian markets and plans to build an LNG plant in Russia’s far east.

The company wants to export gas to China, where Gazprom plans to start shipping gas in 2019-2021 via the Power of Siberia pipeline, currently under construction. It also wants access to China’s domestic gas market and end-users via swap deals.

“There are significant gas resources in Russia’s east, while no infrastructure has been built. And that’s why we are interested in gaining access to the future Power of Siberia pipeline,” Rusakova said.

Gazprom Chief Executive Officer Alexei Miller, however, said it had no plans to allow other companies to ship gas via the pipeline.

“Gazprom is not involved in such talks. The conditions, which are stipulated in the contract signed as part of the intergovernmental agreement with China, are such that all the gas volumes in Power of Siberia belong to Gazprom,” he said at a news conference on Friday.

But Miller also said Gazprom may allow a Russian company to enter the Baltic LNG project, due to be launched in 2023.

Rosneft plans to produce 100 bcm of gas per year by 2020 and become the world’s third-largest producer of natural gas sometime later, thanks to a number of international projects.

Last year, Rosneft agreed to buy a stake of up to 35 percent in Egypt’s Zohr offshore gas field from Italy’s Eni (ENI.MI). The Russian company also plans to expand in gas projects elsewhere, including Mozambique and Venezuela.

Rusakova said Rosneft and Venezuelan state company PDVSA may consider building an LNG plant in Venezuela.

Additional reporting by Oksana Kobzeva; writing by Vladimir Soldatkin and Jack Stubbs; editing by Dale Hudson and David Clarke

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