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Russian Natural Gas Exports to Europe. Effects of Russian gas market reforms and the rising market power of Gazprom

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Abstract

Gazprom, the dominant gas company in Russia, is widely believed to be the key supplier of gas to Europe in the foreseeable future. However, there are numerous uncertainties and challenges within the Russian and European gas industry that may alter the allocation of Gazprom´s gas sales between domestic and export markets. In this paper we use both theoretical and numerical models to study potential effects on Russian gas exports from changes in Russian domestic gas prices and the production capacities in 2015. We also investigate whether the liberalization of the European gas markets may provide incentives for Gazprom to induce monopoly power in its export markets. Our main findings suggest that both increased domestic gas prices and sufficient production capacities are vital to maintain Gazprom´s market share in Europe over the next decade. At low domestic prices, Gazprom may even have difficulties to carry out its long-term export commitments. However, if export possibilities are ample due to both lower domestic demand at higher prices and high overall production capacities, a large share of spot trades in Europe may encourage Gazprom to exercise market power in its export markets.

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Bibliographic Info

Paper provided by Research Department of Statistics Norway in its series Discussion Papers with number 445.

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Date of creation: Feb 2006
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Handle: RePEc:ssb:dispap:445

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Keywords: Russia; Natural gas; production capacity; export; Western Europe; price; numerical model;

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References

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  1. Holtsmark, Bjart & Maestad, Ottar, 2002. "Emission trading under the Kyoto Protocol--effects on fossil fuel markets under alternative regimes," Energy Policy, Elsevier, vol. 30(3), pages 207-218, February.
  2. David G. Tarr & Peter D. Thomson, 2004. "The Merits of Dual Pricing of Russian Natural Gas," The World Economy, Wiley Blackwell, vol. 27(8), pages 1173-1194, 08.
  3. Catherine Locatelli, 2003. "The viability of deregulation in the russian gas industry," Post-Print halshs-00001308, HAL.
  4. Quast, Oliver & Locatelli, Catherine, 1997. "Russian natural gas policy and its possible effects on European gas markets," Energy Policy, Elsevier, vol. 25(2), pages 125-133, February.
  5. Dominique Finon & Catherine Locatelli, 2002. "The liberalisation of the European gas market and its consequences for Russia," Post-Print halshs-00187059, HAL.
  6. D. Finon & Catherine Locatelli, 2002. "The liberalisation of the European gas market and its consequences for Russia," Post-Print halshs-00177828, HAL.
  7. Mohammed A. Al-Sahlawi, 1989. "The Demand for Natural Gas: A Survey of Price and Income Elasticities," The Energy Journal, International Association for Energy Economics, vol. 0(Number 1), pages 77-90.
  8. Krichene, Noureddine, 2002. "World crude oil and natural gas: a demand and supply model," Energy Economics, Elsevier, vol. 24(6), pages 557-576, November.
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Cited by:
  1. Knut Einar Rosendahl & Eirik Lund Sagen, 2007. "The Global Natural Gas Market. Will transport cost reductions lead to lower prices?," Discussion Papers 523, Research Department of Statistics Norway.
  2. Spanjer, Aldo, 2007. "Russian gas price reform and the EU-Russia gas relationship: Incentives, consequences and European security of supply," Energy Policy, Elsevier, vol. 35(5), pages 2889-2898, May.
  3. Dominique Finon & Catherine Locatelli, 2008. "Russian and European gas interdependence. Can market forces balance out geopolitics?," Post-Print halshs-00129618, HAL.
  4. Marina Tsygankova, 2007. "The export of Russian gas to Europe: breaking up the monopoly of Gazprom," Discussion Papers 494, Research Department of Statistics Norway.
  5. Dominique Finon & Catherine Locatelli, 2006. "L'interdépendance gazière de la Russie et de l'Union européenne : quel équilibre entre le marché et la géopolitique ?," Post-Print halshs-00119602, HAL.
  6. Catherine Locatelli, 2008. "Gazprom's export strategies under the institutional constraint of the Russian gas market," Post-Print halshs-00341660, HAL.

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