Russian state monopoly Gazprom OAO (ETR:GAZ) GDR (FRA:GAZ) (PINK:OGZPY) is not showing the dynamic reaction from the shale gas challenge, which it is facing. With such attitude “Gazprom” risks becoming an outsider in the natural gas market.
Numerous news headlines have trumpeted major concerns about inflation, which has been at 40-year highs. But how should investors handle inflation as it pertains to their portfolios? At the Morningstar Investment Conference on Monday, Kevin Dreyer, co-CIO of Gabelli Funds, outlined some guidelines for investing in the age of inflation. Historic inflation Dreyer started by Read More
Countries, which depend on Russian gas, are taking action to change the situation. Ukraine and Poland are exploring shale gas deposits, China is as well. Their success,with world leading gas extracting companies mean that in several years Gazprom OAO (ETR:GAZ) GDR (FRA:GAZ) (PINK:OGZPY) may step aside. It will take some time to find the exact potential of shale in these countries, but the success will significantly influence the demand for Russian gas.
According to Bloomberg data, “Gazprom” shipments to Europe in 2012 decreased 14%, and company’s stock lost 9.6%. Gazprom’s earnings per share are expected to fall for 10% in 2012. Since the peak in 2008, “Gazprom” shares have lost 57%, compared with 41% fall for the index. “Gazprom” will not be able to link gas prices to the price of oil, which it has done for years. The company agreed to offer discounts to some of its European consumers. Technical progress in gas extraction and transportation has emerged. Russia will need to act to maintain its competitive advantage.
Gazprom tries to convince people that shale gas is expensive, environmentally unsafe, and will never substitute regular natural gas. Maybe, but the USA has overtaken Russia in 2009 in terms of volume of gas extracting. The U.S. is not interested anymore in the Shtokman project in the Arctic, for which Russia has spent $20 billion. And after year 2015 the USA has the potential to start becoming a natural gas exporter.
Shale gas extracting in China, the U.S., and several Europena countries “creates strategic challenges for existing gas exporters,” a report from the International Energy Agency (IEA) states. According to the IEA prognosis the share of Russian and Middle Eastern producers will decrease from 45% to 35% to year 2035.
Nowadays the unconventional gas – shale gas, tight gas and coalbed methane – may become an alternative to nature gas. And these new sources also put to rest the question of depletion of natural gas supplies.