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  • We are pleased to announce Viktor Zubkov of Gazprom is confirmed as a speaker for EGC 2017
Gazprom's Speech

As you know, Alexander Medvedev, Deputy Chairman of the Management Committee, Gazprom gave a keynote address at European Gas Conference back in January.


Dear participants of the Conference, dear colleagues!

I am happy to welcome you at the European Gas Conference. We have a good tradition to start the new year in the wonderful city of Vienna where the head office of our oldest European partner – OMV AG – is located.

Today I’d like to tell you about our vision of the future of natural gas in the Europe’s  energy mix and the role of Russian gas in providing European energy security.

Let’s start with the results of the year. In 2016, Gazprom’s gas export to Europe reached its historical maximum amounting to nearly 180 billion cubic meters. In January, Gazprom set the absolute supply record for one day – 624 mln cubic meters, which exceeds the daily energy requirements of all European households. In other words, Gazprom alone is able to provide all European residents with heat and electric power. At the same time the clients, having a lot of diversification opportunities, nevertheless prefer to buy gas exactly from us. These figures are the best evidence of the fact that even if new alternatives appear, our gas stays the most competitive and highly demanded for the European markets. And what is more, all the statements about the decline of the share of gas in the European energy mix contradict the market reality.

According to preliminary data from Eurogas analytics, European gas consumption in 2016 increased by approximately 6%, while the economy of the Euro area is restoring much slower – last year its growth did not exceed 2%. It is also important that natural gas is again returning to the power generation sector, winning in inter-fuel competition against coal. Last year Germany – our biggest European client – bought record amounts of 49.8 billion cubic meters of gas from Gazprom. This reflects changes in the structure of power generation sector in the country as well. In 2016, gas consumption in German power generationncreased by more than one fourth, while the use of coal decreased. Another trend is illustrative as well: Germany who is the acknowledged European leader in renewable energy, generation has reduced investments into this subsidized sector by considerable 16% in 2016.

Gas generation is actively developing in the UK as well. In May, 2016, there were days in the UK for the first time since the 80s of the 19th century, when coal-fired power stations did not generate a single kilowatt of electric power. In 2016, less than 10% of electric power against more than 40% in 2012 was generated by coal-fired power stations in the UK. At the same time the share of electricity generated by gas-fired power plants amounted to more than 40% against 25% in 2012. In France the growth of gas consumption amounted to about 10%, while the demand in the generation segment increased by 75%. Undoubtedly, both the pricing environment and the weather factor helped achievements of such high results last year. However, the unique balance of ecological and economic advantages of natural gas allows us to make optimistic forecasts for a longer perspective.

We are witnessing the growth of gas consumption not only in the power generation sector. There is an  increase of interest all over Europe to the use of natural gas as transport fuel, especially LNG as bunkering fuel and fuel for trucks. According to the consensus forecast by the leading world energy agencies, thanks to the new growth points, Europe will need about 90 billion cubic meters of gas by 2025 and more than 120 billion cubic meters of gas by 2035 in addition to the present amounts consumed.

But how does Europe intend to provide its growing needs in natural gas? Its own resources are not enough to achieve this goal. Gas production in the British sector of the North Sea is stagnating and investments in the new expensive projects are decreasing. The output from the Dutch Groningen gas field – the pioneer of European gas industry – decreased more than twice or by 30 billion cubic meters in absolute terms since 2013. Last year Norway exported record amounts of gas to Europe but, as our Norwegian colleagues repeatedly acknowledged, the country will not be able to increase the output because of the limited resource base. Hopes that the American shale revolution could be repeated in Europe did not come true either. And American liquefied gas is now being directed to the more economically attractive markets of Asia and South America.

Thanks to all that today Gazprom remains the only supplier capable to provide additional gas to Europe promptly and reliably, and actually in any amounts. We’ll be able to supply as much gas as Europe orders.  Our production facilities are able to provide volumes exceeding the actual production by more than 150 billion cubic meters per year. This allows us to quickly increase gas supplies inside our country and beyond its borders at the time of the winter maximum consumption periods. Our extensive network of gas pipelines and underground gas storages, unique flexibility of our contract model and competitive pricing allow to react to daily changes in demand of our European consumers.

The prospects for long-term increase in demand for imported gas are a challenge to the whole Europe from the point of view of energy security. In order to provide increase in demand tomorrow, large-scale investment solutions should be already taken today.  That exactly serves as an incentive for us to invest in new fields and gas pipelines. It is Gazprom that invests today in the energy security of Europe more than anyone else.

Gazprom jointly with its western partners is able and ready to create a powerful infrastructure to supply gas which won’t cost the European taxpayers a cent . The Nord Stream 2 will supply gas exactly to those European regions where there is the highest increase in demand for the “blue fuel”, which is proven by the loading volumes of the first Nord Stream pipeline.  The Nord Stream 2 project is being implemented fully in accordance with the schedule. These days Bovanenkovo-Ukhta-2 gas pipeline, a component part of the Nord Stream 2, was launched. The TurkStream is our another large-scale project, it will bring Russian gas to the promising Turkish market, which has grown nearly three times over the last 15 years; as well as to  South Eastern Europe. Most permits for this project have already been obtained from the Turkish authorities, and last week the inter-governmental agreement on the project has been ratified by the Russian side. Working out a concept for this or that project, Gazprom is always guided by commercial rationale, interests of our  shareholders and certainly the requirements of our clients.  So one “should not look for a black cat where there is none”, politicizing the issue of future transit routes. The Nord Stream 2 project is implemented not because we want to deprive the Ukraine of currency coming from gas transit, but because  both we and our Austrian, German, French, Dutch, British partners want to supply gas to Europe along the shortest direct route, saving  on transportation, payments for transit, and actively reducing the environmental impact.

The parties that actively promote construction of new regasification terminals in Europe and their supplying with liquefied gas from the USA, are not always guided by commercial logic. The capacities of regasification terminals in Europe are already excessive. Last year they were only loaded by one fourth. LNG always goes to places where it can be sold more profitably. We know it, as we have been exporting LNG since 2009.  It is not cheap to bring LNG, for example, from the USA, regasify and distribute it. It is also much less predictable than to supply gas along a pipeline.  Pipeline supplies are on around the clock irrespective of environmental conditions while a tanker operates in accordance with the “actual weather”. Besides, LNG production itself strongly depends on the global pricing environment. In 2016, only one investment solution was taken globally on building an LNG plant. Other projects were put off.  Will it be possible to rely on these supplies to meet a long-term increase in demand? It is a question for the market to answer.

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Dear colleagues! Russian gas is and will be a logically correct, economically profitable and reliable solution for satisfying Europe’s energy demand. The experience of our half-a-century-long cooperation with the organizer of this Conference – OMV AG – in a whole number of areas from production and transportation of natural gas to joint cultural and sponsorship  projects, is the best proof of that. Our cooperation is always a two-way street. Gazprom will always be interested in the European market to which our company is ready to supply as much gas as it will be required. Together we can provide Europe with environmentally friendly fuel at competitive prices. This is a mutually beneficial situations, where there are no losers!