Thursday, 12 April 2012

Putin knows that the shale gas revolution will lead to the end of his corrupted regime

Russia´s ruler Vladimir Putin seems to realize that the American led shale gas revolution will in the end lead to the demise of his corrupted regime. In a speech to the Russian Duma Putin desperately urged energy giant Gazprom and other Russian energy companies to find ways to stop the shale gas revolution:

Russian Prime Minister Vladimir Putin has urged his country's gas industry to "rise to the challenge" of shale gas as the United States and some European countries forge ahead with developing the controversial energy source.
US shale gas production may "seriously" restructure supply and demand in the global hydrocarbons market, Putin said yesterday (11 April) in his final address to the Russian Duma before he takes over as president on 7 May.
"Our country's energy companies absolutely have to be ready right now to meet this challenge," he said.
Putin said Russia must be prepared for "any external shocks" as the world had entered "an era of turbulence", coupled with "a new wave of technological change" that was "changing the configuration of global markets".
"I fully agree with the proposal of deputies that we need to create a system better, long-term forecasting of macroeconomic, financial, technological and defense. This is especially important, given that the XXI century promises to be an epoch folding the new geopolitical centers of financial, economic, cultural and civilisation," he added.
According to press agency Bloomberg, the U.S. overtook Russia as the biggest producer of gas in 2009 as it extracted fuel trapped in shale rocks (see background). That has cut prices and led nations from China to Poland to explore for such resources, potentially cutting their reliance on Russian gas.
According to Statfor, the U.S.-based global intelligence company providing geopolitical analysis and commentary, the Russian gas business is struggling with a number of problems, mostly related to its Byzantine pricing system.
Indeed, Gazprom is losing money on its domestic sales as it costs the company approximately $132 to produce or acquire and then distribute 1 tcm of natural gas, but its revenue from the domestic market is only $80 per tcm, which means Gazprom loses more than $50 per tcm sold domestically. Considering that the domestic market makes up 60% of sales, the loss is monumental, Stratfor reports.
Gazprom is also concerned about its revenues from sales to Europe, which will decrease amid negotiations over new natural gas prices with many of its European customers. Coupled with Europe's diversification of natural gas supplies away from Russia, this means Gazprom could soon be unable to continue offsetting its domestic losses with high profit margins from sales on the European market, the U.S. global intelligence company writes.

Read the entire article here

Putin´s speech is another sign of desperation. The Russians - with Putin as the de facto "chairman of the board" of the badly managed Gazprom - will never be able to compete with the professionally run American and international energy companies which are in the forefront of the shale gas revolution. Without the easy money from the sale of Russia´s energy resources, Putin will not be able to stay in power for long.

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