OAO Gazprom is seeking to reassure investors of its growth prospects as a looming supply glut threatens to depress European demand for Russian natural gas for years.
Gazprom's managers, in the midst of a roadshow that takes them to Moscow, London and New York this month, are telling investors the company's share of the European natural-gas market will grow to nearly a third by 2020 from about a quarter now.
Meanwhile, a Gazprom presentation shows sales to all export markets outside the former Soviet Union will more than double -- to between 320 billion and 345 billion cubic meters by 2030 from about 140 billion cubic meters this year. The company says it will export 161 billion cubic meters to Europe this year, up 15% from last year.
Gazprom's growth targets, however, contrast with recent changes in the global natural-gas market. The company's exports slumped last year as the economic downturn slashed industrial demand for the fuel. Meanwhile, supply surged as liquefied-natural-gas projects came onstream and production of unconventional shale gas boomed in the U.S.
"I don't have very good news for Russia, I'm afraid," Fatih Birol, chief economist at the International Energy Agency, told an investment conference in Moscow last week. He said the supply glut would last until 2015.
The industry's changes mark a big shift from the days when Russia sought to remake itself as an energy superpower and was accused by the U.S. and others of using its natural-gas exports as a geopolitical weapon to bully its neighbors.
Gazprom itself acknowledged how weak energy demand is changing its strategy when it announced a three-year delay to the start of its massive Shtokman field in the Arctic on Friday. Shtokman was supposed to produce its first gas in 2013 and begin shipments of liquefied natural gas, or LNG, to North America in 2014.
In a statement, Gazprom said it had agreed with partners Statoil ASA, of Norway, and France's Total SA to postpone production from Shtokman until 2016. It already has put back the start date for another big gas field, Bovanenkovo on the Arctic Yamal peninsula, by a year until 2012.
Gazprom officials predict the supply glut will dissipate more quickly than Mr. Birol of the IEA says. European demand will rebound by 2012, they say -- with climate-change policies being a key driver.
Gas burns much more cleanly than coal and is widely seen as an important bridge to a low-carbon future.
They also point to the decline in domestic European production of gas in places like the North Sea, which will boost demand for imports.
Meanwhile, Gazprom says its market share in Europe is underpinned by a large portfolio of long-term contracts.
It says it already has contracted to deliver 3.1 trillion cubic meters of gas to Europe between this year and 2035, according to the presentation to investors, guaranteeing revenue of about $1 trillion.
The big game-changer for suppliers like Gazprom has been the shale-gas boom in the U.S. Deposits of natural gas trapped in shale-rock formations that once were considered too costly to exploit have become commercially viable thanks to innovative technologies such as horizontal drilling and new ways of fracturing rock.
U.S. shale-gas output grew from less than a billion cubic feet a day in 1998 to about five billion cubic feet daily last year. In 2009, the U.S. overtook Russia as the world's largest natural-gas producer.
Russian officials have tended to downplay the unconventional-gas revolution and warn of dangers in exploiting the resource. Alexander Medvedev, Gazprom's deputy chief executive, told an industry conference in October that the potential pollution of water reservoirs caused by shale-gas production could be a problem.
But the surge in American output has affected Gazprom by increasing competition between suppliers in Europe. LNG cargoes that originally were destined for the U.S. have been diverted to European markets, driving down spot prices below the oil-linked price of gas in Gazprom's long-term supply contracts. Some customers responded last year by buying the minimum amount of gas allowed under their contracts with Gazprom and buying more LNG instead.